Sold Business Assets Through an Online Marketplace

[John Dileo]

I have an audio production business, and sold a bunch of older production gear, both Section 179 and Deminimus Safe Harbor, through an online marketplace (Reverb.com). Previously, I simply reported these sales of gear on Form 4797, which shows up on my 1040 - and is not subject to self-employment tax.

However, since I'll be getting a 1099-K this year from the marketplace for these business asset sales, Turbo Tax is placing that income directly into my Schedule C, which will make it subject to SE Tax. Plus, if I still enter it on the 4797, as I'm supposed to, much of that gain will show up on both my Schedule C AND my 1040. I can't be the only small business having this dilemma, but there is zero info on the net. Any advice would be appreciated.

[JamesG1 · Accepted solution]

The income rightly is reflected on the IRS form 4797 Sales of Business Property.  To also report the income directly into your Schedule C misrepresents the income.

I recommend reporting the income only on the IRS form 4797 Sales of Business Property.

If you want to acknowledge the receipt of the IRS form 1099-K, consider entering the income as other income.  Then reverse the income by using the box "This amount in box 1a is too high or includes some personal transactions."  The reversed amount is reported at the top of Schedule 1 Form 1040.

In your tax return work papers, make sure you explain where the 1099-K income is correctly reported should a tax authority ask questions about the income at a later time.

[John Dileo]

That's EXACTLY the answer I needed. Thanks so much!