Sale of assets

[cas8161]

If I have a  corporation return that has 5000 assets is there a way to make just one or two entries to show sale of assest instead of going into every seperate asset showing sale date and cost of sale 

[Jim-from-Ohio]

are the ones being sold fully depreciated going into the year you are working on?

[ivlabonne]

Hi jim,

I am not the original poster for this question but I have the same issue. it's a "how to in the tax software"

sub S sold all assets on installment sale, some are fully depreciated and some are not. there are 55 assets. How can I get the assets to one 6252 and not double up using the 4797 and the 6252 when entering the asset sale. I use the disposition section of the asset entry worksheet to get the asset off the book. the software says I can't go to the 6252 for some assets.

I know I am showing total sale and sale on 6252 but do not know how to fix.

Irene

[Jim-from-Ohio]

the sale of asset has to have a gain for the 6252 to popualate.  For the ones where the program will not populate the 6252 was the sale a gain or a loss?

[ivlabonne]

Gain or loss depends on how I allocate the sale price of $400,000 amongst the 55 assets.

some are sitting on the books fully depreciated from 30 years ago. I have no idea how I should allocate amongst the 55 assets. My assumption would be pro-rata but the newer assets not fully depreciated are definitely worth more. total assets on the books are $817k depreciation is $763k. Sold for $400k.

I have gotten myself so totally immersed in this situation that I have confused my brain to the point I am unsure of everything.

I just want to make sure they pay the proper tax but not overpay due to my not understanding how the tax software is handling something like this.

[TaxMonkey]

You can "trick" the software by creating one asset with the consolidated totals of the fixed assets - purchase price, depreciation, etc.  An then "sell" that asset, and simply delete all the other assets.

Make sure to keep the type of property the same in a consolidated entry.  1245 property is treated differently in a sale than 1250 or 1231 property.

[TaxMonkey]

Allocating the purchase price among the assets is NOT something that you should be doing.  This is something that is negotiated during sale, between the buyer and the seller.  This information is also reported on Form 8594 and should be included with the tax return.

This is something you need to kick back to the taxpayer to solve.  The allocation of the sale price has tax consequences for both the buyer and the seller.

[Jim-from-Ohio]

55 is not that many assets really.. I would make all the assets except one to break even on the sale and have one asset absorb the gain or loss. 

[TaxMonkey]

That would potentially be very risky, as both the buyer's and seller's tax returns should agree on the purchase price of the assets.  Not to mention, presumably some of the price is attributable to goodwill.

Section 1245 property, in particular has tax ramifications, as tax on the depreciation recapture cannot be deferred in an installment sale, and is due immediately.  Furthermore, the buyer will want to depreciate the assets, and there should be agreement on their purchase price.

[Jim-from-Ohio]

i agree it is not the best method.. i often see no agreements on what was being allocated to each item being sold and not even a asset listing of items sold. 

[abctax55]

Also, the sale of any assets depreciated using § 179 are reported as an attachment to the K-1 rather than directly on the S-Corp return

[ivlabonne]

I am very sorry that i haven't been clearer in my questions:

Sale $1,200,000 allocated as $400,000 equipment (as a total, assets not individually broken down)

$800,000 goodwill, client list etc.  Payments over 10 years at stated interest rate. client received 5 payments of principal and interest, no down payment. they know that depreciation will have to be recaptured regardless of how much or how little they received.

55 assets in varying stages of depreciation, some fully depreciated, some partly depreciated.

Question:

1. I need to get all the 1245 (all had or have depreciation attached to them) off the books. NO Real Estate.

2. How to correctly allocate the $400,000 sale of equipment among the assets, so that the correct depreciation is recaptured.  say as an example a 1982 asset for 3,000 was fully depreciated using ACRS, if I use zero as the sale value then no depreciation gets recaptured and it does not go on the 6252. where does it go....?

3. if I use the disposition part of the AES and allocate any amount of the sale value then it goes to the 4797.

I am in danger of using the same asset as if it was sold with payment in full by doing it this way..

so I am looking for answers to have the tax payer pay the correct amount in this year.

I believe my issue is a lack of understanding of how the software works between getting rid of the assets on the 1120-s and the 6252 and 4797.

Apparently I my prior emails I was not clear. I am sorry.

irene

[ivlabonne]

Please see my last post.

[TaxMonkey]

I am not an expert in ProSeries, but I do not believe that it has a "bulk sale feature".  You will either have to do it manually:

https://proconnect.intuit.com/support/en-us/help-article/form-8949/entering-bulk-disposition-assets-...

Or each asset separately.

If you are just asking about allocating the sales, there is no correct answer.  Any reasonable method would be fine.  I think personally, I would just make one manual entry for the sale of all of the assets.

You may want to review the assets with the taxpayer to see if any of them were actually disposed of in prior years.

If I understand you correctly you have $817k of 1245 assets with $763k of depreciation.  It sounds like you will have $346k in profit all subject to depreciation recapture.  I wouldn't use any allocation that gives a different result.

[ivlabonne]

,what do you mean as an attachment to the K-1?

[ivlabonne]

What di you mean as an attachment to the K-1 rather than on the 1120S

[TaxMonkey]

s179 depreciation and recapture is a separately stated line item on the K-1.  It is not rolled into box 1 of the K-1 like normal depreciation.  This is because individual shareholders are subject to their own limits on deducting s179 depreciation.