If you are no longer in business, you should not be continuing to take depreciation on assets. The IRS has a checklist of items that constitute a business and if you do not qualify, it is considered to be a hobby. One of the foremost is that you show a profit in 3 out of every 5 years.
In order
to make this determination, taxpayers should consider the following factors:
- Does the
time and effort put into the activity indicate an intention to make a
profit?
- Does the
taxpayer depend on income from the activity?
- If there are
losses, are they due to circumstances beyond the taxpayer’s control or did
they occur in the start-up phase of the business?
- Has the
taxpayer changed methods of operation to improve profitability?
- Does the
taxpayer or his/her advisors have the knowledge needed to carry on the
activity as a successful business?
- Has the
taxpayer made a profit in similar activities in the past?
- Does the
activity make a profit in some years?
From <https://www.irs.gov/uac/business-or-hobby-answer-has-implications-for-deductions>
