Can our LLC still take depreciation expense if the equipment was thrown away due to water and rodent damage while in storage? No insurance and no warranty.

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Equipment was dumped in 2021.  Can we continue the 7 year depreciation in 2022 and 2023 and 2024 and 2025?  The 7th year would be 2025.

[tagteam]

In the year of disposition, you would have entered (or should have entered) this as a disposition for $0.

The balance of this loss would then be reported on Form 4797 as an ordinary loss. 

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The disposition happened in 2021 but the LLC never entered it as a disposition of $0 (didn't know).  And the LLC never reported an ordinary loss on form 4797 (didn't know).

1) how can the LLC fix that?

2) can the LLC still continue depreciating those assets that were disposed of in 2021?

Thank you so much "TagTeam"

[tagteam]

You can amend your 2021 return to show the disposition of the assets.

[tagteam]

You can't continue taking depreciation deductions on assets no longer owned.

[Opus 17]

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@tagteam wrote:

You can amend your 2021 return to show the disposition of the assets.

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You have three years from the original tax filing deadline to file an amended return.  If this is a single member LLC reported on schedule C, you would amend your personal return, and it would be due April 18, 2025, or October 15 if you had an extension in 2022.  If this is a multi-member LLC that filed a form 1065 partnership return, that needs to be amended, and the deadline is March 15, 2025, or September 15 if you had an extension.  Then each member will get a new K-1 to use to amend their personal returns.

If you depreciated the equipment in 2022 and 2023, you will also need to file amended returns for those years to remove the depreciation.  As stated, you can't depreciation equipment you don't own.  If you still had a basis in the equipment, the disposal in 2021 will create a loss that can offset your taxable income for that year. 

[tagteam]

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@Opus 17 wrote:
If you depreciated the equipment in 2022 and 2023, you will also need to file amended returns for those years to remove the depreciation. 

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From the original question, it doesn't appear as if returns (presumably 1065s) were filed for 2022 and 2023.

Irrespective of filing deadlines, it may not even be worth filing an amended return (again, presumably a 1065 with associated K-1s) if the dollar amount is insufficient to justify doing so, considering this transaction resulted in a net loss.