Business equipment repossessed time frame.

[ritastone001]

Have a client who purchased equipment in January. In August he did a voluntary return. It is a recourse loan. I am told he hasn't heard from the lender since the equipment was resold other than to let him know he still owes approx 15K. When is this entered on the tax return? Shouldn't he have received a 1099-C or something similar from the lender? At that point would it be handled?  For some reason, this isn't clear to me. This grey blonde is having a moment. Would appreciate someone remind me what I am forgetting. 

[PATAX]

Hi Rita , maybe he has not received a 1099-C because the lender told him he still owes $15,000 so apparently the debt has not been canceled or forgiven .. Just my opinion

[ritastone001]

/Thanks for responding. So do we wait to report it on the return until he receives one? This is where I am not understanding the path to do it correctly.

[PATAX]

In my opinion it appears as of now it is still a debt, and when the debt is Forgiven then it will be income... If you pick it up in 2020 as debt forgiveness income then what will you do if it is Forgiven in 2021 and then a 2021 1099-C is issued... and who knows maybe your client may come up on some money and pay that $15,000 debt off maybe.. Just my opinion

[ritastone001]

Yes that makes sense. Depreciation allowable on 2020 return?  That's enough. Going to take a break. Thank you for taking the time to answer me. 

[PATAX]

You're welcome... We have to try to help each other since this profession is not getting any easier...

[ritastone001]

Oh I agree with you 100%.  Thanks again.

[TaxGuyBill]

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@ritastone001 wrote:

Depreciation allowable on 2020 return? 

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There is no depreciation for an asset that is "placed in service" and then taken out of service in the same year.

[ritastone001]

You are right of course. I don't know why this has thrown my reasoning skills. Here is the actual case and if someone would help me I will appreciate it. Equipment bought Jan 2020. Paid 67000 total. Paid 7000 down and financed 60000, Returned it in August. Recourse loan.  Lender has resold and now the balance due is $15000. Do I show this as a sale on 4797?   And then if there is a 1099C next year that is handled then. 

[ritastone001]

I am actually leaving for a while. Maybe later this will make sense to me.

[ritastone001]

I want to thank you again for your response and patience on this question. Yesterdays confusion has cleared up. 

[ritastone001]

Just want to say thank you again for your patience concerning this questions yesterday. My confusion has cleared up today.