topic Large assets deduction in Business & farm

Large assets deduction

Johnny86 — Fri, 03 Jul 2020 00:16:06 GMT

Hello,

Last year I started new business, I purchased 100 android tablets with the intent of using them as rental to my customers. However, the business didn't work out.. I had minor revenue compared to my investment and I no longer continued the business in 2020. Can I use my purchase as assets deduction, and how do I compute the deduction. TurboTax offers deducting full value but it says it's recommend if I have profit. I spent other expenses so I have large net loss. Would this trigger an audit? I still owe taxes anyway because in 2019 I also received large cash from stock options sale (which is how I funded my failed business). So my overall income combined is still higher than my loss

Thanks

Re: Large assets deduction

Critter-3 — Fri, 03 Jul 2020 01:22:07 GMT

What did you do with all those tablets? What are you going to do with them ?

Re: Large assets deduction

Johnny86 — Fri, 03 Jul 2020 01:31:16 GMT

I still have them, they are stored in my home. No idea what I'm going to do with them but no plans to do anything now since I stopped the business.

Re: Large assets deduction

Critter-3 — Fri, 03 Jul 2020 01:44:07 GMT

Well you have a couple of options ...

1) deduct the total cost as an expense on the sch C then if you ever sell any you will need to report the gain as ordinary income later since you convert the to personal property.

2) enter it as inventory then continue the business and sell them off for what you can... then file a final Sch C when you have liquidated your inventory.

Re: Large assets deduction

Carl — Fri, 03 Jul 2020 12:38:23 GMT

I assume by "last year" you are saying you started the business in 2019. Furthermore I'm assuming it's a sole proprietorship or single member LLC. If all assumptions are correct then you'll report all business income/expenses on SCH C as a part of your personal 1040 tax return. It makes no difference if you're filing a joint return either.

I would suggest you show all hte tablets as inventory in the COGS section. Then sell them off for whatever you can get. Most likely, you won't get what you paid for them. But there comes a point where you just gotta cut your losses as best you can and move on.

Re: Large assets deduction

Johnny86 — Fri, 03 Jul 2020 16:45:53 GMT

Thanks for the response! Actually I started the business (LLC) at the fourth quarter of 2018, and I reported small net loss of $2000. Would that affect the ability to report the purchase of tablets as an expense in schedule c for 2019 ? Also what kind expense should I report it, should I use Miscellaneous items in TurboTox ? Thanks so much for the help

Re: Large assets deduction

Johnny86 — Fri, 03 Jul 2020 16:47:52 GMT

Thanks for the help! Option 1 sounds the best to me since I'm no longer pursuing the business. Under what type of expense can I deduct the total cost of items ? Should I use Miscellaneous items in TurboTox ? Also can I report the shipping fees as well ? Thanks so much for the help