topic Self Employed - Photography - Sold Lens in Get your taxes done using TurboTax

Self Employed - Photography - Sold Lens

MG26 — Wed, 31 Mar 2021 02:32:29 GMT

Hello! I've been using Turbotax for years feeling confident but I don't feel as sharp as years go by. Ha!

So...

I started a photography business in 2014 and claimed some equipment as assets and had a depreciation schedule, etc. Did the same for 2015. I didn't perform photography or do a schedule C for two years and started back up in 2018 & 2019 but I suppose the depreciation hadn't carried over automatically due to skipped years. I don't know how IRS view non-contiguous years of business. I don't know if I should be doing this stuff myself anymore. Anyhow, that's the history.

This year, 2020, I didn't conduct any photography services due to Covid but I did sell a lens not declared as asset at any time. The net was $216. Should I do a Schedule C for this or just put as other income?

Re: Self Employed - Photography - Sold Lens

Opus 17 — Wed, 31 Mar 2021 03:00:12 GMT

Anytime you sell property, you only owe tax if you have a gain, that is if you sell the property for more than your adjusted cost basis. For most personal property, your adjusted cost basis is whatever you paid for it originally. (For gifted property, your cost basis is what the original give her paid, and for inherited property, the cost basis is the fair market value on the date the previous owner died.)

Business property is a little different, because taking a deduction for depreciation an expense reduces the cost basis. For example, suppose you had a lens that cost $1000 new and you immediately put it into use as business property, and you had fully depreciated it over five years of business use. It’s adjusted cost basis would be zero, so the entire $216 selling price would be a type of capital gain called “depreciation recapture” and would be taxable income (because it is a recovery of a previous deduction).

However, if this particular lens was never listed as a business asset and was never depreciated, then it’s adjusted cost basis is whatever you paid for it when you acquired it, new or used, and you only have taxable income to report if you sold it for more than you originally paid for it.

Separately, even if you later sell equipment that was part of your business assets, you would not open a new schedule C just to report income from the sale. It would be a capital gain if you sold it for more than the adjusted cost basis. It would be reported on schedule D as a capital gain, not as business income. You would only start filing a schedule C again if you decided to go back to photography as a “ongoing trade or business.“

Re: Self Employed - Photography - Sold Lens

Opus 17 — Wed, 31 Mar 2021 03:01:03 GMT

Tl,dr; it’s not taxable income.

Re: Self Employed - Photography - Sold Lens

MG26 — Wed, 31 Mar 2021 03:48:04 GMT

Wow, Thanks for your detailed reply!