Working on an 1120S, client sold business vehicle. MACR 5yr depreciation was used. Never used SEC 179 on the deprecation. Purchased vehicle in 2014 and sold it in 2019. Purchase Price $33,302; Sold $21,000 Accum Depr $32,342 and Adj Basis $960. There is a gain of $20,040
I placed the entry of the sale on the 1120S form 4797 Part III Sect 1245. First I want verify I placed my entry to the appropriate Part and Section - is this correct?
Here is what my entry looks like on Form 4797 Part III and Section 1245
Line 20 Gross Sales $21,000
Line 21 Cost Basis $33,302
Line 22 Accum Depr $32,342
Line 23 Adjusted Basis $960
Line 24 Total Gain $20,040
Part III Summary Gains
Line 30 Total Gains $20,040
Line 31 Add property columns A thru D $20,040
Finally $20,040 automatically was transferred to Line 13 and Line 17 on Part II on Form 4797
Since I choose Form 4797 Part III Sect 1245, the gain of $20,040 was automatically transferred to Line 4 (Net Gain from form 4797 line 17) on my 1120S which added additional income and increased my overall Ordinary Income (Profit) to $21,128 line 21 of the 1120S.
I created the K-1 and all that is showing up on the K-1 is Line 1 Ordinary income (profit) of $21,128
My confusion/question is.. Not sure if I need to make a separate entry to add the gain of $20,040 and the depr recapture of $32,342 from the 1120S to the K-1 so the shareholder would show the gain on their personal return Form 1040 Schedule D as a capital gain and the recapture on their personal 1040 form 4797?
I believe I am over thinking this... I believe I do not add the gain or the depr recapture to the K-1 since its already figured into their ordinary income on Line 1 of their K-1 and no Sec 179 was taken during its depreciating time. I do not physically make any sort of entry on their Form 1040 for the vehicle gain and accum depr - Is that correct?
Yes my post is long, I like to make sure I explain everything exactly how I entered it so it will help you to answer my question(s).
Thank you in advance for your assistance.
