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Level 2

Journal entries to record the sale of a fixed asset with Section 179 deduction

I have a piece of equipment that was purchased in March, 2015 for $7,035.  We took a 100% Section 179 deduction on it in 2015.

 

In October, 2018, we sold the equipment for $4,500.

The depreciation schedule for 200DB/HY is:

2015 - 1,407.00

2016 - 2,251.20

2017 - 1,350.72

2018 -    810.43

 

In my GJ entry for depreciation in 2015, I had this:

 

CREDIT - Accumulated Depreciation - 7,035

DEBIT   -  Depreciation Expense  - 7,035

 

I know that I need to recapture the section 179 and pay gains on the difference.  I have 2 questions:

 

1.  Can I take 1/2 year depreciation in 2018 for the equipment?

2.  What does the GJ entry look like to recapture the section 179, post the sale and recognize the gain on the difference in depreciation amounts?

 

TIA

 

5 Comments
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Level 15

Journal entries to record the sale of a fixed asset with Section 179 deduction

Depreciation schedule is moot, then. You Accelerated = all expense.

 

"Can I take 1/2 year depreciation in 2018 for the equipment?"

There is nothing left to Depreciate, and you cannot Mix your concepts, anyway, for this final year. It's Too Late; you took it as expense in 2015. Poof! All gone, already.

 

We don't have enough info, and a QB user forum isn't the place to ask for Tax Rule Guidance, anyway. You can read what the IRS states, for instance (note this is listed as for 2017, not for 2018):

https://taxmap.irs.gov/taxmap/pubs/p946-013.htm

 

And you work with your own CPA or tax prepayer.

Highlighted
Level 2

Journal entries to record the sale of a fixed asset with Section 179 deduction

Hi and thank you for your response!

 

I've read the Tax Guides and I understand that I took all the depreciation, but since I sold the asset earlier than the 5 years life of the asset, I have to calculate or recapture the amount of excess depreciation that I took and I am required to claim as income.  This is where the question about claiming 1/2 of the 2018 depreciation comes from.  

 

Putting that question aside, I am struggling to understand the GJ entry to show the recapture of the excess depreciation.  

 

Am I still off in the weeds?

 

 

 

Highlighted
Level 2

Journal entries to record the sale of a fixed asset with Section 179 deduction

Anybody????

 

Highlighted
Level 10

Journal entries to record the sale of a fixed asset with Section 179 deduction

 

From a tax perspective, it's simple as I see it. The entire proceeds fall into taxable income, given that the tax value is zero.

From an accounting perspective, you should not have depreciated the entire amount in year 1, if you had wanted your b/sheet and P&L to be realistic. But you did, so it's moot

Highlighted
Level 2

Journal entries to record the sale of a fixed asset with Section 179 deduction

Hi Malcolm,

 

Thank you for your response.  I appreciate it!!

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