topic Closure of Sole Proprietorship in Deductions & credits

Closure of Sole Proprietorship

Grrr1 — Sat, 06 Mar 2021 20:08:54 GMT

I shut down a sole proprietor educational consulting service in early 2020. I had outstanding Section 179 balances on my 2019 return. Can I take some or all of that remaining balance on my 2020 return?

Re: Closure of Sole Proprietorship

MaryK4 — Sat, 06 Mar 2021 20:29:40 GMT

No you cannot deduct 179 depreciation if you ended your business, In fact, you may need to file Form 4797, Sales of Business Property, if closing your business causes the business use of an eligible property under Section 179 to drop to 50% or less.

Re: Closure of Sole Proprietorship

Grrr1 — Sat, 06 Mar 2021 20:39:08 GMT

MaryK1101, Tnx for the feedback. I did not sell my consulting business. At 74, I was unwilling to wait for someone to come along and pick up the slack. No one had the expertise and knowledge re my area of consulting, so I just closed it and my related newsletter service down cold turkey.

Re: Closure of Sole Proprietorship

ToddL99 — Sat, 06 Mar 2021 22:23:54 GMT

Once you ceased operations, you can no longer claim depreciation on any business assets. Also, Section 179 deductions are only available in the year you place the asset in service.

When you close a business, you have to "dispose" of any remaining business assets in order to determine if there was a loss on those assets (you weren't able to sell them or keep them for personal use) or if there were any gains on those assets (sold them or converted to personal use at a value more than the remaining cost basis).

Go through the Business Assets interview and select this option - "The item was sold, retired, stolen, destroyed, disposed of, converted to personal use, traded in, etc". Complete the interview and the program will generate the correct forms to report any business gain or loss