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Sale & disposal of depreciable assets upon close of business

I sold or disposed of my business assets listed on Form 4797.  I also sold or disposed of other assets which were not listed.

 

  1. It appears that the Form 4797 Line 18b sold assets were transferred as income to the Form 1040 Schedule 1 Part I Line 4. Then with business income or loss (Line 9), transferred to Form 1040, Line 7a. Why does this income from sale of business assets NOT go to Schedule C as business income?
  2. Do I enter the sale of non-listed/non depreciated assets as Business Income on Schedule C line 1a.
  3. Why is there a difference in how these sales are handled and where they are reported?

Thanks.

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Accepted Solutions

Sale & disposal of depreciable assets upon close of business

Unless you are in the business of selling business assets (in which case the assets would be considered inventory), the proceeds (presumably resulting in gain) therefrom are not derived in the ordinary course of your trade or business.

 

Therefore, gain is simply treated as ordinary or capital gain, obviously not subject to self-employment tax, which is the proper treatment. 

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RobertG
Expert Alumni

Sale & disposal of depreciable assets upon close of business

Income from the sale of business assets does not go to Schedule C as business income because income from the sale of business assets is treated as a capital gain or loss.

 

In other words, it's taxed differently. 

 

Income from the sale of assets is not subject to self-employment tax.  There is also depreciation recapture to consider, and the gain on the sale of assets held over one year is taxed at the lower long term capital gains rate.

 

All of this is computed by TurboTax when you enter the sale of business assets.

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View solution in original post

4 Replies

Sale & disposal of depreciable assets upon close of business

Unless you are in the business of selling business assets (in which case the assets would be considered inventory), the proceeds (presumably resulting in gain) therefrom are not derived in the ordinary course of your trade or business.

 

Therefore, gain is simply treated as ordinary or capital gain, obviously not subject to self-employment tax, which is the proper treatment. 

RobertG
Expert Alumni

Sale & disposal of depreciable assets upon close of business

Income from the sale of business assets does not go to Schedule C as business income because income from the sale of business assets is treated as a capital gain or loss.

 

In other words, it's taxed differently. 

 

Income from the sale of assets is not subject to self-employment tax.  There is also depreciation recapture to consider, and the gain on the sale of assets held over one year is taxed at the lower long term capital gains rate.

 

All of this is computed by TurboTax when you enter the sale of business assets.

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

Sale & disposal of depreciable assets upon close of business

These are assets are generally small items which have not been depreciated or Section 179. Where do they get entered, on the 1040 worksheet under other income, Line 8 or somewhere else?

Sale & disposal of depreciable assets upon close of business

Generally, if the items cost $2500 or less you can expense them using the de minimis safe harbor election (Schedule C under Expenses).

 

See https://www.irs.gov/businesses/small-businesses-self-employed/tangible-property-final-regulations#Ad...

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