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  1. #1

    Default Rental Income Form 4562 Gds 5 Year Property Retires but Still in Use - How to Account

    Good Day all, my question involves form 4562 for a partnership return. When I calc'd the asset (refrigerator and cabinets and dishwasher...) I placed them on a 5yr schedule and added the amount into line 17 carrying it into the future years (yr 1,2,3,4,5). It is now yr 6 and due to the 1/2 yr function it is time to retire these assets. But, they are still in use. I did not replace or sell them. Question: how do I account for the loss of the deduction since it is now depleted and has no more depreciation? Do I simply deduct the annual portion out of line 17 and report the new (lower) net deduction amount going forward?

    If that is the case, when I hit the 15 yr mark in yr 16, do I do the same?

    Please help as I just realized this is my situation when I finally sat down to do my partnership return and now I cannot find an answer to this online. Please help. Thank you!!!

  2. #2
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    Oct 2006
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    15,683

    Default Re: Rental Income Form 4562 Gds 5 Year Property Retires but Still in Use - How to Acc

    Quote Quoting LandlordHelp4Bo
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    Good Day all, my question involves form 4562 for a partnership return. When I calc'd the asset (refrigerator and cabinets and dishwasher...) I placed them on a 5yr schedule and added the amount into line 17 carrying it into the future years (yr 1,2,3,4,5). It is now yr 6 and due to the 1/2 yr function it is time to retire these assets. But, they are still in use. I did not replace or sell them. Question: how do I account for the loss of the deduction since it is now depleted and has no more depreciation? Do I simply deduct the annual portion out of line 17 and report the new (lower) net deduction amount going forward?

    If that is the case, when I hit the 15 yr mark in yr 16, do I do the same?

    Please help as I just realized this is my situation when I finally sat down to do my partnership return and now I cannot find an answer to this online. Please help. Thank you!!!
    Is this a manual tax return or are you using software? Do the items have any salvage value or are they simply done? For appliances I would simply remove them from the depreciation detail listing when they are fully depreciated because normally an appliance would not have a salvage value, nor would it be a significant factor in a sale of the property. One would not want or need to recapture depreciation on a 5 or more year old appliance.

    Other, more valuable items with longer life spans would have to be evaluated individually. Anything with a salvage value would definitely need to remain on the depreciation detail list even if they are already fully depreciated.

  3. #3

    Default Re: Rental Income Form 4562 Gds 5 Year Property Retires but Still in Use - How to Acc

    Quote Quoting llworking
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    Is this a manual tax return or are you using software? Do the items have any salvage value or are they simply done? For appliances I would simply remove them from the depreciation detail listing when they are fully depreciated because normally an appliance would not have a salvage value, nor would it be a significant factor in a sale of the property. One would not want or need to recapture depreciation on a 5 or more year old appliance.

    Other, more valuable items with longer life spans would have to be evaluated individually. Anything with a salvage value would definitely need to remain on the depreciation detail list even if they are already fully depreciated.
    Thank you for your response. It helps alot. I am doing the partnership return by hand and the 1040 in turbotax. I would do it all in TT but I am on Mac and they do not support the platform for their business products which cover partnership returns. Thus, I manually complete forms 4562, 8825 and 1065 and accompanying K1s and input into TT on the 1040.

    So if I am understanding you correctly, I will simply reduce my line 17 on form 4562 for year 2018 by the amount of the zeroed out assets (in this example $4000) and continue using that new lower line 17 total going forward until other assets retire. I will do this even though I am still using them but they basically have no salvage value.

    Is there any form I need to show I removed them from the depreciation other than line 17 on form 4562? Since I am not selling them or scrapping them, I don't think any other forms are necessary, correct?

  4. #4
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    15,683

    Default Re: Rental Income Form 4562 Gds 5 Year Property Retires but Still in Use - How to Acc

    Quote Quoting LandlordHelp4Bo
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    Thank you for your response. It helps alot. I am doing the partnership return by hand and the 1040 in turbotax. I would do it all in TT but I am on Mac and they do not support the platform for their business products which cover partnership returns. Thus, I manually complete forms 4562, 8825 and 1065 and accompanying K1s and input into TT on the 1040.

    So if I am understanding you correctly, I will simply reduce my line 17 on form 4562 for year 2018 by the amount of the zeroed out assets (in this example $4000) and continue using that new lower line 17 total going forward until other assets retire. I will do this even though I am still using them but they basically have no salvage value.

    Is there any form I need to show I removed them from the depreciation other than line 17 on form 4562? Since I am not selling them or scrapping them, I don't think any other forms are necessary, correct?
    Doing a partnership return by hand is really ill advised, particularly under the new tax laws and the new requirements for basis recording and QBI. (Qualified Business Income) At a minimum, you need to print out a ready the new instructions for filing a 1065 and the accompanying forms.

    I am a tax professional, over thirty years now, and I would not do one by hand these days even if someone wanted to pay me 10 times my normal rate.

  5. #5

    Default Re: Rental Income Form 4562 Gds 5 Year Property Retires but Still in Use - How to Acc

    Thank you for your reply I apreciate it. What software do you use.

    So just to make sure I understand, by simply remove them from the depreciation detail listing, I would just reduce the amount of line 17 on form 4562 by the amount of the retired 5 yr asset?

    Do I need to fill out form 4797 Part II section 10? Please note I am not selling anything nor replacing. Still using the assets, just they passed the 5 yr depreciation life.

    Thank you.

  6. #6
    Join Date
    Oct 2006
    Posts
    15,683

    Default Re: Rental Income Form 4562 Gds 5 Year Property Retires but Still in Use - How to Acc

    Quote Quoting LandlordHelp4Bo
    View Post
    Thank you for your reply I apreciate it. What software do you use.

    So just to make sure I understand, by simply remove them from the depreciation detail listing, I would just reduce the amount of line 17 on form 4562 by the amount of the retired 5 yr asset?

    Do I need to fill out form 4797 Part II section 10? Please note I am not selling anything nor replacing. Still using the assets, just they passed the 5 yr depreciation life.

    Thank you.
    You are not selling the assets so no, you would not fill out form 4797.

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