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Depreciation

Sold / scrapped disposal method

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This topic describes the fields that appear in the Disposal tab or the Enter Disposal Information window after you select Sold / Scrapped as the method of disposal and you enter the date on which the asset was disposed.

Special information

note
The application does not automatically handle exchanges involving non-qualifying property; it assumes all losses are unrecognized.

Fields and buttons

Gross proceeds
Enter the gross proceeds from the sale.
note
This field is available only for the Sold / Scrapped method of disposal.
Expenses related to sale
Enter the amount of expenses related to the sale in this box. Amounts entered here are added to the cost of the asset for reporting on Form 4797.
note
This field is available only for the Sold / Scrapped method of disposal.
Overall business use %
If the asset is listed property or a luxury auto and you entered Sold / Scrapped, enter the asset's overall (or lifetime) business use percentage. The application uses this overall percentage to calculate the basis for the gain/loss calculation only. The percentage does not affect any year's depreciation expense.
note
This field is available only for the Sold / Scrapped method of disposal if the asset is listed property, a luxury auto, or a home office asset.
Tax depreciation allowed
This shows the amount of depreciation actually taken on the disposed asset. When disposing of a single asset, you can override the amount here if the depreciation is greater or you disagree with the total.
note
This field is available only for the Sold / Scrapped method of disposal.
Tax depreciation taken on other property
The application automatically enters depreciation allowed on other property for 1245 assets that were received in trade from a prior Like-kind exchange and the option is marked under Setup, Options. If you disagree with the total, you can override the amount in this field.
Tax gain/(loss)
The application automatically calculates and displays the gain or loss for this asset. You can't override the gain or loss on this tab.
To view an explanation of the gain/loss calculation, select the underlined field label to open the Tax Gain/(Loss) window.
note
This field is available only for the Sold / Scrapped method of disposal.
Book depreciation allowed
This shows the amount of depreciation actually taken on the disposed asset. When disposing of a single asset, you can override the amount here if you disagree with the total.
note
This field is available only for the Sold / Scrapped method of disposal.
Book depreciation taken on other property
The application automatically enters depreciation allowed on other property for 1245 assets that were received in trade from a prior Like-kind exchange and the option is marked under Setup, Options. If you disagree with the total, you can override the amount in this box.
Book gain/(loss)
The application automatically calculates and displays the gain or loss for this asset.  You can't override the gain or loss on this tab.
To view an explanation of the gain/loss calculation, select the underlined field label to open the Book Gain/(Loss) window.
note
This is available only for the Sold / Scrapped method of disposal.
Type of Property (for Form 4797)
From the dropdown list, select the type of property being disposed of to determine which part of Form 4797 applies. The application default is section 1245 property used in a trade or business or section 1250 real property. If you are uncertain about which part of Form 4797 applies, consult the IRS instructions for the form.
When you enter Form 4797 information for raised cattle, horses, or other livestock sold at a gain, you must use the force options that are available from the dropdown list.
If you don't want the asset reported on Form 4797, select
Not reported on Form 4797
 from
Type of property
.
note
These are only available for the Sold / Scrapped method of disposal.
If the asset was not used in trade or business, select
Not used in trade or business
 from
Type of property
.
note
This is available only for the Sold / Scrapped method of disposal.
Personal property exchange
Mark this checkbox if the asset is Section 1245 property that should be disposed of as a like-kind exchange for book or state purposes.
note
This option is only available for:
  • Section 1245 property when the book treatment has
    Follows 1031 Pre TCJA
     marked under Setup, Treatment, then Book.
  • Assets with CA as a treatment with a disposal date before 1/11/19.
  • Assets with AR, IA, IN, or NH as a treatment for tax years beginning 2018 and later.
In order for 1040 CA clients to follow 1031 Pre TCJA, they must have less than $250,000 for a single filer or $500,000 for a joint filer with a disposal date after 1/10/19. To enable this, go to Setup, Treatment options for the CA treatment and mark the
Follows 1031 Pre TCJA after 1/10/19 – Less than 250,00/500,000
 option.
Proceeds reported on Form 1099
Mark this checkbox if proceeds were reported on Form 1099.
note
This is available only for the Sold / Scrapped method of disposal.
Sale to related party (disallowed loss)
Mark this checkbox if the asset was sold to a related party and the loss is disallowed.
note
This is available only for the Sold / Scrapped method of disposal.
State/Other LKE Information…
Select this to open a window in which you can enter the like-kind exchange disposal information for personal property exchange.
note
This option is only available for:
  • Section 1245 property when the book treatment has
    Follows 1031 Pre TCJA
     marked under Setup, Treatment, then Book.
  • Assets with CA as a treatment with a disposal date before 1/11/19.
  • Assets with AR, IA, IN, or NH as a treatment for tax years beginning 2018 and later.
In order for 1040 CA clients to follow 1031 Pre TCJA, they must have less than $250,000 for a single filer or $500,000 for a joint filer with a disposal date after 1/10/19. To enable this, go to Setup, Treatment options for the CA treatment and mark
Follows 1031 Pre TCJA after 1/10/19 – Less than 250,00/500,000
.
Apply bus use % to gross proceeds and expenses
Mark this checkbox to apply the business use percentage to gross proceeds and expenses.
note
This is available only for the Sold / Scrapped method of disposal.
Form 4797 Part III Real Property button
When disposing of an asset that results in a Form 4797 Part III gain, select this to access a window in which you can supply the necessary information so UltraTax CS can prepare Form 4797, Part III.
note
This is available only for the Sold / Scrapped method of disposal.
Installment Sale (or Income Classification) button
Select this to open a window in which you can enter installment sale information to complete Form 6252.
For 990 clients only:
 If the entity type of the open client is Exempt, Income Classification appears here, rather than the Installment Sale button.
note
This button is available only for the Sold / Scrapped method of disposal.
State Information button
Select this to open a window in which you can enter state information regarding this asset for the following states.
  • 1040 clients:
     Idaho, Iowa, Massachusetts, New Hampshire, Pennsylvania, Vermont, and Wisconsin.
  • 1120 clients:
     Pennsylvania and Wisconsin
  • 1065 clients:
     Pennsylvania and Wisconsin
note
This is available only for the Sold / Scrapped method of disposal.
The following boxes appear only for 1120 S Corporation clients.
FMV at S election date
If the asset is subject to the S Corporation built-in gains tax, enter the fair market value at the S corporation election date. The application calculates the amount of recognized built-in gain or loss on that asset.
  • The built-in gains tax allocated to ordinary income items transfers to the Taxes and Licenses line on Form 1120S, Page 1.
  • The built-in gains tax allocated to section 1231 items reduces the section 1231 gain reported on Schedule K for Form 1120S.
  • The built-in gains tax allocated to unrecaptured section 1250 items reduces the section 1231 gain and the unrecaptured section 1250 gain reported on Schedule K for Form 1120S.
note
This only appears for 1120 S Corporation clients when Sold / Scrapped is selected in
Method
.
Adjusted basis at S election date
If the asset is subject to the S Corporation built-in gains tax, enter the adjusted basis at the S corporation election date. The application calculates the amount of recognized built-in gain or loss on that asset.
  • The built-in gains tax allocated to ordinary income items transfers to the Taxes and Licenses line on Form 1120S, Page 1.
  • The built-in gains tax allocated to section 1231 items reduces the section 1231 gain reported on Schedule K for Form 1120S.
  • The built-in gains tax allocated to unrecaptured section 1250 items reduces the section 1231 gain and the unrecaptured section 1250 gain reported on Schedule K for Form 1120S.
note
This only appears for 1120 S Corporation clients when Sold / Scrapped is selected in
Method
.
Amount paid in advance
Enter the amount paid in advance against the built-in gain.
note
This only appears if the Puerto Rico treatment is added to the client and the tax year end is 2014 or later.

This article applies to:

  • Product: UltraTax CS
  • Return type: 1040 Individual,1120 Corporation,1065 Partnership,1041 Fiduciary,990 Exempt Organization
  • Subject: Depreciation

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