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Returning Member
posted Apr 15, 2024 10:19:24 AM

De minimis items converted to personal at close of SMLLC

Hello,

I had a SMLLC from end of 2018 to end of 2020. I did not file a separate return for the LLC - I put it in with my personal taxes as a business. I purchased a small enclosed trailer for use for the business in 2019 and deducted it as a de minimis safe harbor in my 2019 return (trailer cost just under $2,100). When I closed my business, I kept the trailer for personal use. I still have it, and am filing my (extended) 2020 return now (not last minute or anything!). 

I found a thread here in which ToddL said "No, items expensed under the de  minimus safe harbor provision do not get tracked to their eventual disposal.

In order to track an item (asset) for purposes of calculating any gain (loss) on disposal, it has to be entered as an "asset" in the "Business Assets" section of "Your Business".

Should you ever dispose of (i.e. sell) an item expensed under the de minimus safe harbor provision, you would be responsible for reporting any gain on sale. Its adjusted cost basis would be zero ("0"), so there wouldn't be any loss on disposal."

My question is - since I kept this trailer for personal use (did not dispose of it) am I correct in understanding I do not need to account for the trailer being converted to personal use/don't need to show anything about it in this final return for the business? I had some inventory carried over on my 2019 return that I did convert to personal use, just wanted to make sure I didn't need to somehow do that with the trailer. The trailer was not counted as inventory, it was on schedule C. 

 

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1 Replies
Expert Alumni
Apr 22, 2024 8:53:45 AM

Yes, you have fully expensed the cost of the trailer for your business. Converting it now to personal use is not a taxable event. Compare this to recycling used copy paper - the business paid for it, used it, and now you have a use for it. There is nothing to record.

 

The difference between the trailer and the inventory is that you were still carrying the inventory as a business asset with potential future value. While the trailer has value, the business received the benefit for its value through depreciation.