Necessity to Use Form 4797 Part 2 for Asset Sales?

"nish" wrote

Yes.

My fear here is that "nish" is on a path to ditch his accountant and have the book accounting magically flow to the tax software. If that's the case, then I highly recommend not trusting the assigned tax lines from the software to drop all the required details into the tax return. It just doesn't work that easily.

Such segregation of asset sales on form 4797 is required. And that's the way it goes.

But in the year of sale, we don't use a form 4562.

ChEAr$, Harlan Lunsford, EA n LA

Sure. But where's he going to pick up his prior depreciation and current year depreciation if not from the depreciation schedules? And where do you look for those?

Form 4562 is there carrying summary information that is generated by a third party product that manages the fixed assets. I was only focused on what methods are allowed for *disposal* of fixed assets. It would have been nice if summary entries could have been generated on 4562 (or anywhere else) for all of the assets being sold instead of having to manually recreate them all one at a time. Lots of work there for absolutely nothing gained.

In the example I gave, the assets are being sold for nearly nothing ($175), but the heavy processes involved with disposing them are going to cost thousands (in time for the coming to correctly follow processes in the software for disposal, and in their time to review the tax return detail filled in by accountant). It's just one of those very frustrating situations where process and regulation kills human productivity for no realized gain for the government.

No no no Paul. Nish is on a path to trying to understand what the process is so that he can a) provide relevant and correct information to the accountant; b) provide an efficient process for generating the return; c) understand what the heck is written on the forms that come back; d) ask half-intelligent questions when there are choices about ways to do things.

"nish" wrote

It's a five minute journal entry at most.

Credit your fixed asset account for it's historical cost Debit the accumulated depreciation account for the depreciation taken on that item over the years Debit cash for the sales proceeds and Debit or credit for a loss or gain on the sale of the asset.

If you threw the asset in the dumpster, it's the same entry without a cash transaction.

Why do you need to do this?

If you have an accountant, use their expertise and heed their guidance.

Indeed. Where do "I" look for them? In my files, of course. And not on a 4562 which is not filed with the return.

Oh,you THOUGHT that I used the Taxwise deprciation calculations based on first year's computation and automatically carrying them forward? No, I have my own ways of doing things. The Lunsford way.

ChEAr$, Harlan

That is the easy part and we did it. That wasn't part of my time calculation.

The hard part (for us) was having to then repeat the process in the tax software and set up a reminder to proofread the tax return for that detail when the accountant sends it back. The accountant will independently duplicate all of that effort in his own tax software and will also play a game of "go fetch" asking for documentation to establish purchase and sale information for each individual asset. Finding hardcopy and sending that to him all takes time and creates a lot of waste of human effort for no gain.

Okay, it's the law, and like lots of laws it serves a bureaucracy and not any purpose of efficiency.

nish

"nish" wrote

Hmmmm. Seems to me that your accountant is being more thorough than maybe they need to be. Asking for a copy of the purchase receipt - at the time the asset is sold - is silly. Asking for it in the year of purchase makes sense, then you trust your depreciation schedule to be correct from then on.

And if you know he wants sales information, create a file called "Give to accountant" and stuff it full of crap and hand it to him in January.

The purpose is to compute the correct gain or loss on the disposition of the asset.