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What is the best way to claim a loss on business assets when closing a business?

txlobo360 — Sat, 01 Jun 2019 02:07:50 GMT

I purchased the assets new in 2016 and am closing the business.

How is your business structured? Partnership, LLC, Sole P...

JaimeG — Sat, 01 Jun 2019 02:07:51 GMT

How is your business structured? Partnership, LLC, Sole Proprietorship etc.

Sole proprietorship

txlobo360 — Sat, 01 Jun 2019 02:07:53 GMT

Sole proprietorship

https://ttlc.intuit.com/replies/5613444">https://ttlc.intuit.com/replies/5613444</a>

S corp

traci — Sat, 01 Jun 2019 02:07:54 GMT

S corp

@traci please post a new message. This thread deals with...

Carl — Sat, 01 Jun 2019 02:07:55 GMT

@traci please post a new message. This thread deals with a sole proprietorship. Having answers for two different business structures in the same thread will confuse others.

If this is a sole proprietorship or single member LLC bus...

Carl — Sat, 01 Jun 2019 02:07:55 GMT

If this is a sole proprietorship or single member LLC business that you've been reporting on SCH C as a part of your personal tax return, here's how you report to the IRS that you have closed, sold or otherwise disposed of your business.

Closed SCH C Business

You need to report your business as "sold or otherwise disposed of".

Start working through your business "as if" you still own it. On the 2nd or 3rd screen in select the option for "I sold, closed or otherwise disposed of this business in 2016". If prompted for the date, enter the day after you last day of business in 2016.

If your business had no income in the tax year, you can not leave the business income section blank. You 'must' enter a digit, even if that digit is a ZERO.

If you had no business expenses, then you can leave that blank and don't even have to work that section through, if you don't want to.

If your business carried an inventory, the end of year (EOY) inventory must be zero. If it's not, then in the COGS section indicate that you removed all of the remaining inventory for personal use. that effectively makes your EOY inventory balance, zero.

If your business had assets, then you must show the disposition of those assets. In the Business Assets section work through each individual asset on at a time, and select YES on the screen, "DId you stop using this asset in 2016?". Then on the next screen, "Special Handling Required?" if you sold the asset, select no and you will be prompted for your sales information on that specific asset. If you did NOT sell the asset, click the YES button and continue on. You must do this for each individual asset listed, even if it's already fully depreciated.

If you claimed any vehicle expenses in your business at any time from the day you opened your business, then you must most show the disposition of that vehicle. Work through the Business Vehicle Expenses section and indicate that you stopped using that asset in the business, when prompted. Then show your disposition of that vehicle. Most likely, you'll indicate that it was removed for personal use.

Once you have done all the above, that will make the 2016 tax year the last year you will file a SCH C for this specific business.

Carl, my business car was totaled in an accident and the...

frinaldi — Sat, 01 Jun 2019 02:07:57 GMT

Carl, my business car was totaled in an accident and the loan paid off by the insurance company. The car was not replaced. Due to injuries I can no longer work and have closed my business without any 2016 income. How do I handle this on my return?

same as above. For the car though, you have no loss. If i...

Carl — Sat, 01 Jun 2019 02:07:59 GMT

same as above. For the car though, you have no loss. If insurance paid it off, I doubt the car's value was even the payoff amount. In essence, you sold the car to the insurance company. There's nothing to report concerning it, unless you put money in your pocket out of the payoff. Then you'd be reporting a taxable gain.