Recapture of Sect 179

[cpabsd]

I have an S corp that disposed of Equipment for which Section 179 deduction was taken. Total Gain was $20,511. Of this amount, $16,011 was attributable to depreciation ($10,000 was Section 179). How should this transaction look on the individual shareholder's return? I thought I understood how to report but am confused now. the shareholder owns 100% of the corporation. None of the above transaction is transferring when I import the K1.

Thanks,

Bonnie

[Dale in IN]

Bonnie;

We need more information on your Equipment for the recapture.Date Purchased? Purchase Price, Type of Equipment? Years to be Depreciated? Amount of 179 deduction? Sale Date? and Sales price.Schedule C or F business. If you can get me these figures I will see if I can get you an answer.

Dale in IN

[kcjenkins]

Look at the K-1, this income info should be in Line 11F, which is entered on the 'Detail - Items' tab. And in Line 20, Code H is recapture of Investment income, to explain the entry on 11F.

[cpabsd]

Here are the additional details requested.

construction Equipment - original purchase 7/15/09 Section 179 claimed 10,000, 7 year life asset

Total depreciation at time of disposal - 16,011

sold 4/5/10 Sales price - 24,000

Gain on Sale - $20,511

This equipment was sold within the S corporation with my client being 100% shareholder. Corp return was done using ATX. $20,511 gain was shown on Schedule K-1, Line 17 code K

What would be the amount of Section 179 recapture and how should it be reported on Form 1040? I currently am showing it on Schedule E page 2 on separate line for Miscellaneous income.

Thanks for the help.

[OldJack]

Read the instructions on page 4 & 5 of form 4797. Recapture takes place on the S-corp tax return when you fill out form 4797 and include sec.179 depreciation in with other depreciation resulting in ordinary income on form 4797. The K-1 statement advises the shareholder of the sec.179 recapture as the shareholder may or may not have deducted the sec.179.

[Dale in IN]

Bonnie:

Business is dead here this week. So I have worked with your info for the last few hours. You did not include a purchase price. So I have come up by back figuring with a purchase price of $32655. However it is more simple than you can imagine. It is all short term gain subject to ordinary tax. You will need to use a form 4797. fill in the input sheet and mark force to Part II. If my purchase price is nit correct use your correct one. Your figures will go to your 1120S line 4 and line 14.

Sales of business proprety are not subject to recapture rules. Less than 50% use is. I found this in THE TAXBOOK Deluxe Edition on page 6-12 and 9-16.

Dale