Fixed Asset

When entering a new fixed asset with acquisition cost and accumulated depreciation, why do I get the message saying " No transaction dated before lock date (12/31/2021) can be created or updated"? When click OK, asset is not created.

My lock date is set to 12/31/2021.
My current period is 1/1/2022 - 12/31/2022.

If I turn off Lock Date, all prior accounting periods show the fixed asset, which is not appropriate since the asset is acquired 1/1/2022.

How do I enter a start date for fixed asset?

Would appreciate any help!

One of these should help depending on what you are doing - starting a new business or migrating from another system

I have been using manager for couple of years doing accounting for an LLC. Beginning in 2022, a member has contributed assets to the LLC which were already partially depreciated. So I need to set up a fixed asset in the LLC and maintain current accumulated depreciation. So far, have not figured out a way to do this.

I’ve seen in one of the guides to use “Start Date”. But under settings, I do not find “Start Date”.

I am using version

Welcome to the forum @rain53

According to most – if not all – accounting standards, the fair value of the assets should be recorded as cost at the date of acquisition. In your case that should be the date of transfer of ownership. No depreciation should appear in your books as of that date for that particular asset.

You should not book your asset with a Starting Balance since that’s not what the field is for.


Well, I agree normally. But in this case, since the asset is coming from a Sole Proprietorship and the LLC form 1065 K-1 passes down to the member’s personal 1040, my understanding is there is no gain or loss on the transfer of the personal asset to the LLC. Instead, I’m understanding the fixed asset should be held at the current basis as it was with the sole proprietorship.

Any new thoughts?

@rain53, some of your thinking is not clear. The LLC’s Form 1065 is irrelevant to this issue. From an accounting standpoint, there is no connection with the LLC’s accounts and the member’s prior tax filings.

The relevant facts are:

  • The sole proprietorship previously owned an asset with a book value. This is equivalent to owning that asset personally, with the same book value.
  • The individual (whether a new or continuing LLC member) contributed the asset to the LLC as an in-kind contribution of capital. This is recorded in Manager via a journal entry, debiting Fixed assets and crediting the member’s capital account. The LLC now owes the member for the value of that contribution, the same way it would owe a merchant who has not yet been paid for purchase of the asset via purchase invoice.
  • Closing book value from the proprietorship is one possible way to value the acquisition of the asset. This will result in no gain or loss to the member on personal taxes.
  • Other valuation methods may result in personal gains or losses to the member, reportable on personal taxes, but they have no impact on the LLC’s accounts.
  • Market value of the asset is another possible valuation method, especially if the member took accelerated depreciation in any form. Recapture of depreciation may be necessary by the member if the asset has not passed its depreciable life.

This is not a simple tax situation. An accountant should be consulted to determine requirements consistent with tax regulations. If you cannot figure out how to handle the specific recommendations of the accountant in Manager, come back to the forum.

But @Ealfardan’s comment is correct. From the LLC’s point of view, the asset was acquired at some determinable cost or value, now offset in the member’s capital account. Further depreciation of the asset by the LLC begins anew, not with any carryover of depreciation previously claimed by the member as an individual. The question to be resolved, consistent with your tax laws, is what the transferred value of the asset should be.

I appreciate your comments and I agree mostly. This LLC is taxed as a partnership, so I am understanding the LLC’s basis in the contributed property is the contributing partner’s adjusted tax basis in the property (Sec 723).

If the asset was fully depreciated, wouldn’t it be as simple as providing acquisition cost and accumulated depreciation at time of setting up fixed asset?

For a partially depreciated asset, I can debit fixed asset account and credit member’s capital account for original purchase price. But is not letting me debit member’s capital account and credit the fixed asset accumulated depreciation account for the current accumulated depreciation.

So for a partially depreciated contributed asset, how do I set things up so I can use “Depreciation Entries” tab going forward?

I would advise to contact a tax consultant that knows what is allowed or not. @Tut and @Ealfardan already gave guidance on what would be usually legal in most jurisdictions. Yes, it is sad that when people give assets that we still have to give it a value and report to tax authorities but that is for most of us the reality we have to accept. In some instances sadly enough some businesses therefore refuse such gifts as they prefer not to have to account for it.

You are jumping to a conclusion unjustified by reality or tax law in your jurisdiction, even forgetting about accounting standards. Imagine this was an arm’s-length transaction. From a legal perspective, the LLC would have no idea how the member accounted for the asset while it was owned privately (or by the proprietorship—same thing). The member may have used straight-line depreciation, declining balance, or taken advantage of accelerated depreciation provisions that included depreciation recovery requirements for premature disposals. (I’m trying to keep this generic, rather than specific to your country.) Whatever the member’s accounting was, the LLC has acquired an asset with value.

That asset value may be more or less than the member’s adjusted tax basis (book value). What could the LLC have purchased the asset for on the open market? Maybe the same as the member’s ending book value, but probably not. Generally in such situations, independent appraisals are required to establish that value.

Absolutely not, because if the asset truly had no value (corresponding to a fully depreciated asset with no scrap value), the LLC would not be accepting it. Therefore, the acquisition could be considered a gift, which for a business constitutes income, unless it is offset by capital account credit. Are you prepared to pay tax on that income? That is just one reason that, as @eko wrote, many businesses refuse the transfer of such assets. Rather than owe an owner for the asset via a capital account, they would prefer a straightforward purchase.

That’s for very good reasons. First, depreciation must be entered through the Depreciation Entries tab, because that is how you access the portions of program code that track book value, etc. Second, the accounting would be incorrect, because the depreciation was not accrued by the LLC, but by the former owner of the asset.

I cannot escape the suspicion that you are fixated on the erroneous belief you mentioned in post #6 that your goal is to ensure no gain or loss for the member upon transfer of the asset to the LLC. Perhaps you are actually the member? How sweet it would be to be able to transfer assets with no tax consequences. But that isn’t possible. Sadly, actions taken without full understanding of financial and tax consequences frequently have adverse outcomes.

For purposes of the LLC, you need to forget the notion that this asset is partially depreciated. It is not. The LLC acquired it at some value, determined in accordance with local tax law and accounting standards. In this case, the acquisition was a capital contribution. It could just as easily have been a purchase invoice from the member. From here on, depreciation entries are no different from any other fixed asset the LLC acquires during its ongoing operations.

But this discussion has wandered far from questions about how to enter fixed assets in Manager. Suffice it to say, you are off track on this, as you’ve heard from two moderators and a proficient Manager user in three very different parts of the world. As I already told you, you need competent local tax advice. Then, we an help you if you don’t understand how to implement the advice.

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Your response is far off base! The scenario I am trying to handle is about a US LLC (taxed as a Partnership) accepting an asset from one of its members that previously depreciated and used the asset in a sole proprietorship.

Generally, Sec. 721 provides that a member’s transfer of property to an LLC taxed as a partnership does not result in income or loss to the member or the LLC. The LLC steps into the shoes of the contributing member with respect to the holding period and adjusted tax basis of the contributed property (Secs. 1223 and 723). This general nonrecognition rule applies both to contributions made upon the formation of the LLC and to subsequent contributions by new or existing members.

I am not asking for clarification on any of the IRS rules. I do have CPA advice. Instead, I am asking how to do specific things in Manager. But my questions are not being addressed.

(1) How do you set a Start Date? See quides 9107 and 9783. Is this documentation current? I do not find a Start Date option when I go to Settings as stated in guide 9783.

(2) Please note the following in guide 9107:

When migrating to Manager from a prior accounting system, fixed assets must be carried forward at their book values from the previous system. This is accomplished in Manager in two steps:

  • Create the fixed asset.
  • Enter starting balances for purchase cost and accumulated depreciation to date being carried over from your old account system. (Manager will automatically calculate book value.)

I am not able to do this when I have a Lock Date as of the End of the Previous accounting year. This makes No Sense. Is this a BUG?

No, it is not. It was completely accurate, but generalized rather than tailored to the US tax code. And I said that.

I fully understood all of that.

No. A start date is no longer required.

Whether the Guide is outdated or not is irrelevant. You are not migrating from a prior accounting system of the LLC. You were already using Manager when the member transferred the asset. So, even under the prior requirement for a start date, the Guide you mention would not have applied. So you can forget about that.

No, it is not a bug. As has already been explained, starting balances apply only upon migration. The way the software is coded, starting balances are set at an artificial date ( in the year 1, if I recall) that is before any lock date you might set. So, if you have a lock date set, starting balances are not allowed for subsequently entered assets or accounts. Moreover, if you were migrating from a prior system to Manager, you would not yet have any lock date set, because you would have no transactions to lock.

But none of that matters. If you are satisfied with your CPA’s opinion that the member’s tax basis (book value) just prior to transfer is the right value for the asset, then use that in Manager as the acquisition cost in the journal entry recording the contribution. This corresponds to the third bullet in post #7 above. I am specifically not agreeing or disagreeing with your accountant’s advice, because we don’t provide tax advice on the forum. However, I will observe there may be other code provisions that influence the situation.

Regardless, you still will not enter any accumulated depreciation. Note that Section 723 says nothing about accumulated depreciation or original purchase price. It mentions only adjusted tax basis. And Section 1223 will only affect any future (ongoing) depreciation schedule and entries, not the acquisition cost for the LLC.

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Thank you for your prompt responses and help.