sale of non-depreciating business property

Forum|Forum|5 years ago
March 26, 2021
4 replies
52 views

I'm a self-employed Photographer with a single-member LLC and during the lockdown period of 2020 I sold some camera equipment I rarely used (lenses and lighting equipment) to help pay the bills. This equipment was purchased outright in 2019 and earlier and was not previously reported as a depreciable asset. As expected, I took a loss on each item sold compared to the original purchase price. So two questions - do I need to report the proceeds from the sales as business income and if so where do I enter it?

TurboTax Home & Biz Windows

LudwigVan_fan

Alumni - Champ

First, a couple of questions.

Are you treating the single member LLC as a Sch C or corporation?

For the items sold; did you ever depreciate the camera equipment or "expense" them for tax purposes?

Did you always treat the sold items as personal for tax purposes?

If the answer is a Sch C and you never treated the sold items as business property; if you sold them at a loss, then you don't have to report the sales and you don't get to deduct the loss.

If you treated them as business assets; then would have to report the sale on F4797, and deduct the basis of the items. If you do that, basis for selling purposes would be cost less depreciation allowed OR ALLOWABLE. That may or may not result in a loss, near break even, or a small gain.

Instructions for form 4797

https://www.irs.gov/pub/irs-pdf/i4797.pdf

See also Form 8949 and its instructions

**Disclaimer: Effort has been made to offer correct information; but due to the discussion forum limitations, the poster disclaims any legal responsibility for the accuracy of the poster's response**

CoreyCAuthor

Level 2

@LudwigVan_fan Thanks for the quick reply, I'll do my best to answer the questions.

As a single member LLC the IRS considers it to be a "disregarded entity". I'm not sure if that answers your question, but it's just a standard LLC that I pay taxes on with my personal taxes, nothing fancy.

None of the equipment was ever depreciated, however on the tax returns for the years purchased they were grouped together in the Office Expenses section of the interview as Photography Equipment.

I don't understand the question "Did you always treat the sold items as personal for tax purposes?". Could you elaborate?

From what you said I'm thinking I don't have to report the proceeds of the sale, but if you could confirm that'd be appreciated. Thanks!

Carl

Level 11

If you expensed the items under Safe Harbor de-Minimus (which allows you to claim what you paid for them as a business expense, instead of depreciating them as a business asset) then you've already deducted what you paid for them originally, as a business expense in whatever tax year you purchased the items.

Therefore, whatever price you got for the items when you sold them, would be reported as normal business income.

The depreciation factor will come into play, only if you did "not" elect the Safe Harbor de-Minimus option when you expensed them in the year you purchased them.