Can a Hobby Expense become a Business Asset?

jhuckins84 · ‎June 6, 2019

I have several pieces of equipment, the value of which I included on previous years' tax returns under Hobby Expenses. Due to the limits on Hobby Expenses, I did not receive a deduction for those expenses.

In 2016, that same hobby has become a business. Since I did not receive a deduction for the equipment costs in previous years, can I list the equipment as a Business Asset for 2016 (i.e. purchased in a previous year, but put into service for the business in 2016)?

KatherineC · ‎June 6, 2019

That depends. You stated that you included the cost of the equipment on prior year tax returns under Hobby Expense.

If you used the cost of the equipment to offset your Hobby Income, then you did deduct the cost of the equipment.

If you deducted the cost of the equipment, you cannot use it as a business asset now. Or you can use it, but it would have zero basis.

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Can a Hobby Expense become a Business Asset?

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