You depreciate the equipment as long as the activities of the sole proprietorship are reported on your tax returns.
If the activities of the sole proprietorship end and are no longer reported on the tax return, no more depreciation is recorded. In a sole proprietorship, your cost basis in the asset is the original cost less depreciation taken.
If you report depreciation of $200 on a $1,000 piece of equipment that you purchased in 2024 in your sole proprietorship, your cost basis in the piece of equipment becomes $800.
If the business ends in 2025 and that piece of equipment is sold for $700, the loss on the sale of the piece of equipment would be $100.
Upon sale of the piece of equipment, there may be a recapture of some or all of the depreciation taken. The TurboTax software will make that calculation for you.
If this does not completely answer your question, please contact us again and provide more information.
See this TurboTax Help here.
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