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Add Asset

Tax Year 2013

 

Asset - Depreciation Worksheet
This worksheet is used to record business asset records for a specific business activity and account for the different tax effects that may result, including section 179 deduction, depreciation, special depreciation, amortization and gains and losses from the sale of business assets.

 

Business Activity
Use the Add Asset link in the worksheet of the business activity for which the business asset is utilized. The following worksheets have an Add Asset link available:

Related Forms
The following forms are automatically generated as required depending on the information entered on this worksheet and optional worksheets added from this worksheet:

See the links to these forms for more details on the tax consequences of each.

 

For more details and information, see IRS Pub. 946, How to Depreciate Property and Pub. 544, Sales and Other Dispositions of Assets.

Reporting Multiple Assets
Use a separate Asset-Depreciation worksheet for each asset the taxpayer is reporting. After saving the information for the first asset, click the "Add Asset" link from the appropriate business activity worksheet to add another Asset-Depreciation worksheet. A total of 99 assets can be added to the return.

 

Once an asset is added to the return file, the asset will be added to the taxpayer's return in following years when the previous year's return is uploaded. The taxpayer can leave the asset as is, current year's depreciation of the asset will be automatically calculated, or the taxpayer can open the asset and record a disposition of the asset.

Directions
Directions for entering information into the Add Asset worksheet are as follows:
Asset Information
Description of Asset Enter a specific description of the property.

 

This description should allow the taxpayer to recall the asset as a unique object at a later date either by memory or written record. Examples: Black Golf Cart, Drill Press #3, Computer-Back office

Date Placed in Service Enter the date the asset was placed in service. This will be the date of purchase only if the property was placed into service immediately after being purchased.

 

Property Converted to Business Use
If the taxpayer converted property held for personal use to use in a trade or business or for the production of income, treat the property as being placed in service on the conversion date. Example: A florist purchased a small truck on October 8, 2008 to use solely as a personal vehicle. On January 8, 2012, the florist purchased a new personal vehicle and began using the small truck for deliveries. The Date Placed in Service for the small truck is January 8, 2012.

Class of Asset Select the class of the asset from the dropdown list.

 

See Classification of Assets for more information on determining the appropriate class to choose.

 

Note: The Recovery Period and the Method/Convention of depreciation for the asset will be automatically calculated based on the date placed in service and the asset class.

Check if Listed Property Check the box if this asset is Listed Property, which includes any of the following:
  • Passenger automobiles weighing 6,000 pounds or less,
  • Any other property used for transportation if the nature of the property lends itself to personal use, such as motorcycles and pick-up trucks,
  • Property generally used for entertainment or recreational purposes (such as photographic, phonographic, communication, and video recording equipment), and
  • Computers and related peripheral equipment

Listed Property does not include the following assets:

  • Photographic, phonographic, communication, or video equipment used exclusively in a taxpayer’s trade or business or at the taxpayer’s regular business establishment,
  • Any computer or peripheral equipment used exclusively at a regular business establishment and owned or leased by the person operating the establishment, including a portion of a dwelling unit used regularly and exclusively for business, or
  • An ambulance, hearse, or other vehicle used for transporting persons or property for hire.
Special Depreciation Election for 1/1/2008 to 12/31/2010 Check this box if either of the following are applicable to this asset:
  • The asset was placed in service between 1/1/2008 and 12/31/2010, and the taxpayer elected out of the special election deduction available at the time the asset was purchased.

Special Note: By checking this box and electing out of the Special Depreciation Allowance for an asset placed in service during the current tax year, the taxpayer may have a higher tax liability if the business was profitable.

 

Important: Once made, this election cannot be revoked without IRS consent.  

State Return Check this box if the taxpayer wants to elect to claim the Special Depreciation Allowance on the state return, if applicable.
Original Cost or Basis Enter the original cost of the property or the taxpayer's basis in the property.

 

Cost and Basis defined
Generally, the taxpayer reports the original cost of the property including commissions and other costs of the purchase and sale. If the taxpayer did not purchase the property, or if the basis of the property is no longer the original cost of the property because of improvements, depreciation, amortization, and/or depletion, the taxpayer must report the basis of the property on the date the property is sold.

 

See IRS Pub. 551, Basis of Assets for more information and details.

Salvage/Land Value
Enter the following amount, whichever is applicable:
  • The salvage value for an asset that is not being depreciated under the MACRS system,
  • The value of land that is either the asset or part of an asset, or
  • Do not make an entry if this asset is being depreciated under the MACRS system.

Salvage Value
The salvage value is the estimated value of an asset at the end of the asset's useful life for the taxpayer.

 

MACRS System
Also known as the Modified Accelerated Cost Recovery System, most property placed in service after 1996 is MACRS property. The exceptions are intangible property, films, video tapes, and recordings, certain corporate or partnership property acquired in a nontaxable transfer, and property the taxpayer has elected to exclude from MACRS depreciation under an exception. Within the MACRS system, both the General Depreciation System (GDS) and Alternative Depreciation System (ADS) are available. 

Percentage Business Use Enter the percentage of use this asset is used for business, if applicable.

 

Do not make an entry if the asset is used by the business 100% of the time.

Section 179 Expense
Enter the following amounts, whichever is applicable:
  • The amount of the basis of this property that is available for the section 179 deduction that the taxpayer wishes to deduct in the current tax year for an asset placed into service during the current tax year, or
  • The amount of the basis of this property that was deducted under section 179 in a previous tax year for an asset placed into service in a previous tax year.

Include amounts allowed for listed property. Also include any section 179 property placed in service by the taxpayer's spouse, even if the taxpayer is filing a separate return.

 

Mixed Business and Personl Assets
If property is used for personal and business use, the property is qualified for Section 179 only if the business use is more than 50% of all use during the first year the property is placed into service.

 

Section 179 Property
See Form 4562 for information and details on what property qualifies under section 179 for this deduction.  

Recovery Period The Recovery Period that will yield the taxpayer the largest tax deduction for the current year will have been autopopulated when the Asset Class was selected above.

 

Enter the Recovery Period to calculate depreciation for the asset only if the taxpayer did not enter the asset class previously.  

 

See Form 4562 for more information and details on Recovery Periods for the depreciation of assets.  

Method/Convention The Depreciation Method and Convention that will yield the taxpayer the largest tax deduction for the current year will have been autopopulated when the Asset Class was selected above.

 

Select the Depreciation Method and Convention from the dropdown list to calculate depreciation for the asset only if the taxpayer did not enter the asset class previously, or if he or she is choosing a different allowable depreciation method and convention.

 

See Form 4562 for more information and details on Depreciation Methods and Conventions for the depreciation of assets.

Total Prior Depreciation Expense for Federal Return Enter the actual amount of depreciation taken for this asset on the federal return in previous years.

 

If the taxpayer does not know the actual amount, leave this amount blank, and the proper amounts that should have been depreciated will be automatically calculated.

Total Prior Depreciation Expense for State Return Enter the actual amount of depreciation taken for this asset on the state return in previous years, if applicable.

 

If the taxpayer does not know the actual amount, leave this amount blank, and the proper amounts that should have been depreciated will be automatically calculated.

 

 Note: Due to differences in federal and state laws, the depreciation taken on the federal and state returns may vary.

Sale or Casualty of Asset
Date of Sale or Casualty Enter the date of the sale of this property or the date that a casualty occurred to the property which destroyed it or lowered its value.
Sale Information of Asset
Enter the following information if the asset was disposed of by a sale.
Line 1 Checkbox
Check the box if the sale of this asset was an ordinary sale.
Line 2 Sales Price
Enter the gross sales price of the asset that was sold.
Line 3 Expenses of Sale
Enter expenses directly related to the sale of the asset that are not included in part of the sales price on the previous line.
Casualty or Theft Information of Asset
Enter the following information if the asset was stolen, destroyed, or devalued by theft or casualty.
Line 1 Casualty or Theft Loss
Check the box if the taxpayer is reporting a casualty or theft of this asset.
Line 2 Income Producing Property
Check the box if this asset was income producing property before the casualty or theft occurred.
Line 3 Insurance or Other Reimbursement
Enter the amount of insurance (or other) reimbursement the taxpayer is entitled to receive, even if the taxpayer has not yet received the reimbursement, or is not going to receive the reimbursement because he or she has decided to not file a claim.

 

Other Reimbursements
The following reimbursements must also be entered here:

  • Any portion of a Federal disaster loan under the Disaster Relief Act which is forgiven from repayment
  • Costs of repairs or repayment for a loss of property made by a person who leases the taxpayer's property
  • Any court award the taxpayer receives for damages from a casualty or loss, including only the amount the taxpayer is able to collect minus attorney's fees and other necessary expenditures for the lawsuit
  • The costs of repairs, restoration, or cleanup services provided by relief agencies
  • Payments from a bonding company for a theft

Lump-Sum Reimbursement
Allocate a lump-sum reimbursement for the casualty or theft of several assets according to the Fair Market Value of each asset at the time of the loss.

 

Grants, Gifts, and Other Payments
Include grants, gifts or other payments received because of a casualty or theft only if the payment is conditioned on the repair or replacement of the property.

 

Use and Occupancy Insurance
Insurance payments made for the purpose of reimbursing the taxpayer for business income losses are not reported here. Instead, they are reported as ordinary business income on the schedule where the taxpayer normally reports the business income.

Line 4 Fair Market Value before Casualty or Theft
Enter the fair market value of the property immediately before the casualty or theft occurred.

 

Fair Market Value Defined
The FMV is the price at which the property could be sold between a willing buyer and a willing seller, each having knowledge of the relevant facts. The difference between the FMV immediately before the casualty or theft and the FMV immediately after represents the decrease in FMV because of the casualty or theft.

 

How to Calculate FMV
FMV is generally determined by a competent appraisal. The appraiser’s knowledge of sales of comparable property about the same time as the casualty or theft, knowledge of the taxpayer's property before and after the occurrence, and the methods of determining FMV are important elements in proving the taxpayer's loss.

Line 5 Fair Market Value After Casualty or Theft
Enter the fair market value of the property immediately after the casualty or theft occurred.

 

See definition and calculation of FMV above.

 

The appraised value of property immediately after the casualty must be adjusted (increased) for the effects of any general market decline that may occur at the same time as the casualty or theft. For example, the value of all nearby property may become depressed because it is in an area where such occurrences are commonplace. This general decline in market value is not part of the property’s decrease in FMV as a result of the casualty or theft.

 

Relationship of Replacement or Repair Costs to the FMV
Replacement cost or the cost of repairs is not necessarily the FMV. However, the taxpayer may be able to use the cost of repairs to the damaged property as evidence of loss in value if the following are true:

  • The repairs are necessary to restore the property to the condition it was in immediately before the casualty,
  • The amount spent for repairs is not excessive,
  • The repairs only correct the damage caused by the casualty, and
  • The value of the property after the repairs is not, as a result of the repairs, more than the value of the property immediately before the casualty.

FMV Real Estate After a Loss
To figure a casualty loss to real estate not used in a trade, business, or other income-producing purposes, measure the decrease in value of the property as a whole. All improvements, such as buildings, trees, and shrubs, are considered together as one item. Figure the loss separately for other items. For example, figure the loss for each piece of furniture separately.

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