How to deduct junked phones with loss. Form 4797 does not seem appropriate as they were not sold.

[tagteam]

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@SML654987 wrote:

Yes, of course. Remaining depreciation is a loss, as stated in my question. 

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I had no problem with the program when entering, and disposing of (junking), a phone on a test return (1120-S in TurboTax Business).

You should be aware, however, that the loss is ordinary due to the fact that the phone was business property regardless of the holding period.

Thus, if the phone had been held longer than one year, the transaction belongs in Part I. If held for one year or less, it is entered in Part II. Either way the remaining depreciation is treated as an ordinary loss.

[AmeliesUncle · Accepted solution]

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@tagteam wrote:

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Thus, if the phone had been held longer than one year, the transaction belongs in Part I. If held for one year or less, it is entered in Part II.

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I disagree.  The OP is correct, and as far as I know, TurboTax (and ProSeries) is faulty in this situation and can not handle this correctly without an override.

As is noted in the Instructions for Form 4797, an Abandonment goes in Part 2 of 4797.  If you put it in Part 1, it incorrectly affects the 1231 carryover rules.

[tagteam]

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@AmeliesUncle wrote:

If you put it in Part 1, it incorrectly affects the 1231 carryover rules.

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Initially, as a knee-jerk reaction, the message I posted was based on the fact that there is an ordinary loss regardless of the Part in which the transaction was entered on the form.

However, you are correct in that the sense that an entry of this type would affect the 1231 lookback rule so, apparently, the only way to handle this scenario is with an override.