Bulk Purchase

[bstaxes]

Taxpayer purchased the contents of a shop going out of business at a real good price. The contents contains lifts, air compressors, torches and other large items. It also contained some small items (nuts and bolts). The larger item should be depreciated and the other could be supplies. How do I depreciate it? Can I take the whole amount as misc items for depr or must it be broken out? I don't think we can break the smaller items (supplies) out. I have never came across a bulk purchase with varied items. I've done bulk dispositions. Any suggestions or sites would be helpful.

[GeorgeM]

Taxpayer purchased the contents of a shop going out of business at a real good price. The contents contains lifts, air compressors, torches and other large items. It also contained some small items (nuts and bolts). The larger item should be depreciated and the other could be supplies. How do I depreciate it? Can I take the whole amount as misc items for depr or must it be broken out? I don't think we can break the smaller items (supplies) out. I have never came across a bulk purchase with varied items. I've done bulk dispositions. Any suggestions or sites would be helpful.

I would take the larger items separately and put a FMV (in line with the purchase price of the lot) price on them and depreciate them and leave the rest as supplies.

[RoyDaleOne]

Paid 1,000.00

Supp 100.00

Tools 900.00

Unless you have a some different need you can use one line item for all tools, etc.

[kcjenkins]

Was an 8594 prepared as part of the sale? If not, you still need to do one. I'd take the large items, list them and then do a column for FMV of each of them, as best you can estimate. Of course, the larger the amount involved, the more liklely you are to need him to get appraisals. But say its not that much, just give it your best shot. Then add up all the amounts, and then take off a small amount for supplies, and then devide the amount paid in the same ratios.

Say you have three big items:

ITEM FMV % OF TOTAL

A $1000 10%

B $5000 50%

C $4000 40%

Now, if he paid $8000 for it all, and you think the supplies are worth $500, then you are going to take 10% of $7500 for item A, 50% of $7500 for item B, and 40% for item C.

[RoyDaleOne]

We use to have "vintage accounts" under ADR. Now I think the name is "general asset accounts". The regulations made it sound like it is difficult to do, when it is very easy.

With the use of this technique only one entry is necessary for the bulk purchase of assets of the same class, like in the facts given.

[bstaxes]

Thanks for your help and suggestions. I will try having the tp grt estimetes of the larger items and put the rest under small tools and supplies. I guess with the economy we might be seeing more of this. This is really starting off as a weird tax season and it isn't even April 14th. Maybe it is two Friday 13th this year.