Section 179 Recapture Example- converted to personal use

[mrduvall]

In 2019 I bought a truck for my business for $46K.  I took the full $46K in section 179 depreciation in 2019.  Unfortunately I had to remove the truck from the business at the beginning of 2020 for 100% personal use. 

I assume I can use MACRS 5 year for the 2019 depreciation and recognize recapture for the difference.    So MACRS depreciation would be $9,200 ($46,000 x 20%) for year 1, and recapture would be $36,800 ($46,000 - $9,200).  This would be if I elected to take no MACRS depreciation for year 2 (2020).

How do I correctly reflect this on the Fixed Asset Worksheet and how do I access the Form 4797 as I'm not seeing it when I shift to Forms mode.  Once to the 4797, how to I add the MACRS depreciation of $9,200 and total recapture?  

[tagteam]

Your profile indicates you are using TurboTax Business and, I presume, you are preparing a 1065.

If that is the case, this "transaction" will not be entered on Form 4797. Rather, you would enter the conversion using Forms Mode on the Section 179 Disposition Report. The figures entered on that form will flow to your K-1s with a statement that contains the details of the transaction.

[AmeliesUncle]

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@mrduvall wrote:

I assume I can use MACRS 5 year for the 2019 depreciation and recognize recapture for the difference.    So MACRS depreciation would be $9,200 ($46,000 x 20%)

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Where are you getting 20% from?

Vehicles that are 50% or less (or drop to 50% or less) calculated using Straight-Line depreciation.  And because the first year usually only gets a 1/2 year of deprecation, that would be 10%.

[mrduvall]

Thanks,

QUESTION 1- On the Section 179 Disposition Report, what should be listed as the sales price?  Asset was purchased in 2019 for $46,580 and fully depreciated through 179.  If I add a straight line year of depreciation for 2019 of $9,316 ($46,580/5) should I list the "sales price" as $37,264 ($46,580 - $9,316)?  I didn't sell the asset only removed it from the business.  As such, should I leave sales price blank and add the $9,316 in the allowable depreciation column (g)?

QUESTION 2- Section 179 Disposition Report indicates that these assets should not be entered on Asset Entry Worksheets.  It exists there from last year.  How do I remove it from this sheet or is that necessary?

QUESTION 3- I need to allocate this to a single partner (A).  I see the SA box on the Section 179 Disposition Report.  I have put a 1 (?) in this box.  Where do I add that on Partner As K1 to pull in the total recapture? 

[tagteam]

@DianeW777 

Unfortunately, the procedure is infinitely more complicated when using TurboTax products.

First of all, TurboTax Business does not have an option to make a selection for business use dropping below 50% in the disposition of assets section of the program.

In TurboTax Business, there is no way to generate a K-1 with a M code on Line 20, without resorting to Forms Mode and even then there is no way to generate a statement outlining the amount of Section 179 recapture (other than a separate, miscellaneous statement).

Further complicating this issue is a TurboTax user needs a personal desktop product to input information from a K-1 with Section 179 recapture since Step-by-Step does not appear to report it correctly (if at all). 

Finally, a user will need to use Forms Mode in a TurboTax personal desktop product and will need to know exactly where to input the figure from the K-1 Line 20(M).