How do I report disposition of depreciated business property as noncash charitable contribution?

[DGEmbry]

My client is giving depreciated property of adj. salvage value of $3000.  If I record the disposition of the assets (depreciation scree) with a $0 proceed, if generates a $3000 loss. However, the client has a charitable contribution receipt from the organization, which will allow a $3000 noncash contribution.

How do I enter the transaction without double dipping  1- in business loss and 2- in charitable contribution.

Thank you!

Diane

[TaxGuyBill]

What software are you using?

I assuming you mean the Adjusted Basis is $3000 (not salvage value)?

Is this a C-corporation?  S-corporation?  Partnership?  1040?  Something else?

[DGEmbry]

I am using Lacerte and it is a for a 1040 / Schedule C.  His $3000 adjusted basis is salvage value as the property is fully depreciated except for $3000 recorded originally in the depreciation schedule as salvage value. 

Thank you

Diane

[TaxGuyBill]

Before you do anything, we need to address that salvage value.

Except for a few uncommon things, Salvage hasn't been used for over 35 years.  Are the assets part of some of the unusual things that Salvage applies?  Or is it a REALLY old asset that was "placed in service" before 1986 (when salvage applied)?  If not, it was depreciated incorrectly, and the Basis is now $0 (but you may be able to file Form 3115 to 'catch up' on the missed depreciation).

[DGEmbry]

It's a grand piano Steinway put in service in 1978

[TaxGuyBill · Accepted solution]

Ah, got it.

You essentially need to tell the program it was converted to personal use, and there should not be any business gain or loss.  I don't use Lacerte, so perhaps somebody else can give specifics for that, but in ProSeries you enter the sale date but leave the sale price BLANK.  Or in your case, there is no need for it be on the depreciation schedule at all, so you could just delete it.

Then just make a regular charitable contribution on Schedule A.

[DGEmbry]

That is pretty much what I was leaning towards, that is, leaving the proceed field "blank" and take the charitable deduction on Schedule A, especially that after testing each option separately in Lacerte, in this case the tax benefit came out better when using the charitable deduction.

PS For the sake of record, I think it is better to dispose of the asset than deleting it.

Thank you for you input TaxGuy Bill, much appreciated.

Diane