How to dispose of vehicle awarded to non-owner spouse in divorce?

[208Accountant]

Hi there,

I am working on a single owner S-Corp return. There is a vehicle on the depreciation schedule with prior depreciation taken. In 2023, the TP (S-Corp Owner) and Spouse divorced. The spouse was awarded the vehicle in the divorce. Do I just delete the vehicle from the depreciation schedule or...?

Thanks in advance!

Audrey

[rbynaker]

Smells a little fishy but you probably need to record a sale of the vehicle at fair market value and a corresponding shareholder distribution in the same amount.

[BobKamman]

I would put a brick on the gas pedal, point it to the edge of a cliff and jump out.  For tax purposes, though, I would want to know the rest of the story.  Were both spouses shareholders?  OK, your post indicates that only your client was the owner.  I suffer from community-property analysis of such situations.  Was the vehicle actually titled to the corporation, or was it in the owner's individual name?  In that case, probably should not have been on the depreciation schedule in the first place.  

Sounds like your client got the company minus the vehicle as part of an equitable distribution, after the spouse got the vehicle.  I would not report it as a sale.  I would just remove it from the balance sheet and reduce the owner's equity by the same amount.