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Posted by nish on September 4, 2008, 7:42 pm
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>> I'm looking at some work that someone did in Lacerte and scratching my
>> head wondering if this level of detail is needed. Company sold four of
>> its assets, for a gain of $175. The fixed asset software that
>> calculated this value correctly dealt with the depreciation to arrive at
>> that gain. The gain was journaled to an "other income" account for
>> "capital asset gains/losses" on the books of the Company and that account
>> is brought into Lacerte as "Other Income".
>>
>> What the person working with this data did is delete the other income and
>> instead go to Schedule D / Form 4797 and manually recreate each asset
>> that was sold. The depreciation for each individual asset, sale price,
>> cost basis, etc, is entered manually. And then Lacerte calculates the
>> same $175 gain, given the same set of facts, and produces a Form 4797 P2
>> showing the detail for each asset.
>>
>> Maybe this shows great diligence, but my question is whether this level
>> of asset-by-asset detail is *required by law*.
>
> Yes.
>> It seems like an awful lot of work to have to manually recreate your
>> fixed asset system data in the tax software whenever you sell an asset.
>> It would surely be nicer to just show this as an other income item and
>> let them audit if they don't believe the number.
>>
>> Is the issue about being able to sell at a capital gains rate, or is the
>> Schedule D needed in order to balance out other things on the return
>> concerning fixed assets?
>>
>> Any insights on how to aggregate this and make it a bit more efficient?
>>
>> nish
>>
>>
>> ========================================= MODERATOR'S COMMENT:
>> I would have thought the asset would have been created in
>> association with form 4562. Yet form 4562 seems to be missing in
>> action.
>> Not a good sign. Recreating the 4562 to conform with previous
>> depreciation schedules seems to be in order first.
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.
> 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.
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.
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