Retained business asset for failed business

[evil_shenanigans]

As a follow-up to my question about Expenses For an Unsuccessful Business: I had a web business I worked on for three years. During that time I filed a Schedule C and deducted my expenses. I quit before ever earning any revenue.

Year 1: Deducted various expenses.

Year 2: Deducted various expenses. Purchased a domain name for $3000. Amortized cost over 15 years and took deduction of $95 (calculated by Turbotax).

Year 3: quit working on business (mid-year). Deducted various expenses. Took deduction for amortized cost of domain name of $217 (calculated by Turbotax).

Now I'm in Year 4. I no longer work on the business, but still own the domain name, which I'd like to keep in case I ever start it up again. Should I somehow recapture the $312 ($95 +$ 217) in deductions I've previously taken?

[Anonymous_ · Accepted solution]

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@evil_shenanigans wrote:

Should I somehow recapture the $312 ($95 +$ 217) in deductions I've previously taken?

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If you merely converted your domain name to personal use, there would be no recapture, not until you dispose of it in a taxable transaction. 

Clearly, amortization deductions cease when you start using the domain name solely for personal purposes.

[Carl]

When you closed the business and converted the domain name asset to personal use, depreciation stopped on that date of conversion. Recapture doesn't occur until the tax year you sell or otherwise dispose of it. If you start the business back up, then depreciation will pick up where it left off. Just be aware the TurboTax program will not be able to correctly handle that situation should you start the business back up in the future.