CCH Axcess Tax

Depreciation Entries for Assets Sold or Traded

When depreciable property is sold, enter the month and day of the sale in the "Date Sold" field of the asset in this section. Depreciation is computed for the current year for non-ACRS assets to the date of sale. In addition, the recapture of any investment credit required is computed if the "ITC Code" field has been coded for the allowance of investment credit. The asset will be removed from Pro Forma for the following year.

If depreciable property is traded for a new asset in a tax-free exchange so that the remaining basis is included in the cost of the new asset, then specific entries are required depending on various factors.

For the old asset, the date of the trade should be entered as the date sold. Recapture of Investment Credit will be calculated when required if you coded the "ITC Code" field for the computation of Investment Credit. The asset will be removed from Pro Forma for the following year.

One or two new assets will be created depending on whether any gain was recognized or boot was given in the exchange. The first asset is created with the same acquisition date, depreciation method, life, and accumulated depreciation as was entered for the sold asset. A like-kind number will then be automatically entered for the sold asset and the new asset that was created. However, if an "X" is entered on Like-Kind Exchanges worksheet > Supplemental Information section to make the election under Section 1.168(i)-6(i) and the automatic sale feature is used, only one asset with the remaining basis of the assets sold and the boot is created with this like-kind exchange. The election also then prints at the top of Form 4562.

If gain is recognized on the exchange or boot given an additional asset will be created. The date sold entered for the old asset is used as the boot asset's acquisition date. The sold asset's method and life are used for the boot asset, and the cost of the asset is the amount of boot given in the exchange or the amount of gain recognized exceeds the boot received.

Both of these assets can be viewed in this section by going into Options/Reset input. These assets will not be automatically created if there is more than one asset sold and therefore additional entries will be required.

If the entire basis is not eligible for Investment Credit, you cannot use the "Automatic ITC" feature, but must enter the credit separately on the Investment Credit worksheet. Do not enter an "N" in the "ITC Code" field.