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Asset Depreciation

jsoles24
Level 3

Happy Easter Tax Preparer community!! My client has a meat smoking business (Yummy) and he had a  meat smoker built. He paid a $9,000 deposit in May 2021 and paid the remaining $9,800 on January 4, 2022 when the meat smoker was completed and delivered. How do I handle the $9,000 deposit made in 2021? Thanks!

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dkh
Level 15

Type of entity depends on how to handle transaction.   Schedule C - there is nothing to report on tax return until the year it's placed in service which sounds like 2022

1065/1120S/1120 -  handle the same as any asset purchase except do no take depreciation

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4 Comments 4
dkh
Level 15

Type of entity depends on how to handle transaction.   Schedule C - there is nothing to report on tax return until the year it's placed in service which sounds like 2022

1065/1120S/1120 -  handle the same as any asset purchase except do no take depreciation

jsoles24
Level 3

Thank you! It is handled on a Schedule C.

qbteachmt
Level 15

"It is handled on a Schedule C."

Then think of the prepayment as money in the Bank = with the Vendor. Nothing else happened, yet.

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dkh
Level 15

You're welcome.   

You could enter the deposit on the depreciation schedule with Type of Asset - X - non-depreciated asset.  It would be a great reminder for next year.