Can an s-corp with no activity still take depreciation for the tax year?

Forum|Forum|5 years ago
March 13, 2021
4 replies
39 views

Client no activity in S-Corp, no income, no withdrawals can they still take depreciation, I know inactive Sched-C arent allowed so is it the same?

Lacerte Tax

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sjrcpa

Level 15

Why was there no activity?

Will there be?

When?

The more I know the more I don’t know.

U

usercarlosAuthor

Level 2

Its off and on business that they arent closing down. Contract work done on whim though S-Corp doesnt make sense and client wont close down and use sched c. It had previous activity tho, so not startup business

rbynaker

Level 13

I would ask the client what happened to the assets. The answer I got one year was "I gave the laptop to my daughter when she started college last year" (congratulations, you now have activity on your tax return!)

P

PKCPAMST

Level 6

Under the Idle Asset Rule, court cases, going back to 1930s, have held that that a taxpayer may continue to claim depreciation deductions while an asset is idle, provided the asset remains devoted to the taxpayer’s business and is ready for use when needed. Idleness does not mean a withdrawal from business use.

Of Course, once the S corporation passes the depreciation expense to the shareholder on a Form K-1, he may or may not be able to use the deduction depending on (1) the shareholder’s basis in stock and debt, (2) the amount of the shareholder's at-risk investment, and (3) the passive activity loss rules. But that's a different matter.

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