Ok. I have a different take on how this should be handled:
- What I think everyone has lost sight of, is this happened 20 years ago. There is no business to close out. This asset has been a personal asset for 20 years.
- What you need is the cost of the property in question; original purchase price in 2001.
- Multiply that by the 14.29% noted in another reply. This is the depreciation that should have been taken.
- You indicate that no depreciation was taken, however, the tax rules provide that the basis is adjusted by depreciation allowed or allowable. So bottom line, you need to reduce the cost of the equipment by the depreciation allowed.
- You indicate the business went under "less than a year later". Not sure of exact timing based on this statement. Does this mean you purchased the equipment and then closed the business in the same year? This could make a difference in handling this matter. If property, such as this asset, is placed in service and "sold" within the same year, no depreciation is taken. So if you closed out your business in 2001, then no depreciation will be allowed.
- Next, adjust your original cost basis based on the discussion above.
- Now determine your gain or loss; sales price minus adjusted basis.
- Since the asset has been a personal asset for 20 years, if you have a gain, report this on form 8949 which will then flow to Schedule D.
- There is potential for depreciation recapture as noted by @ColeenD3 , but we don't have sufficient information and I presume it is highly unlikely you have a gain.
- If you have a loss, no deduction since this is a personal asset and no depreciation recapture.
*A reminder that posts in a forum such as this do not constitute tax advice.
Also keep in mind the date of replies, as tax law changes.
