topic Business did not operate for the last 3 years but may in future. Should I continue to report depreciation on schedule C? in Business & farm

Business did not operate for the last 3 years but may in future. Should I continue to report depreciation on schedule C?

Countingcat — Sat, 01 Jun 2019 15:42:12 GMT

We sold eggs locally and some products at a local farmer's market for a few years. The last 3 years we have done nothing with this business but have some equipment that is depreciating.

If you are no longer in business, you should not be conti...

Coleen3 — Sat, 01 Jun 2019 15:42:52 GMT

If you are no longer in business, you should not be continuing to take depreciation on assets. The IRS has a checklist of items that constitute a business and if you do not qualify, it is considered to be a hobby. One of the foremost is that you show a profit in 3 out of every 5 years.

In order to make this determination, taxpayers should consider the following factors:

Does the time and effort put into the activity indicate an intention to make a profit?
Does the taxpayer depend on income from the activity?
If there are losses, are they due to circumstances beyond the taxpayer’s control or did they occur in the start-up phase of the business?
Has the taxpayer changed methods of operation to improve profitability?
Does the taxpayer or his/her advisors have the knowledge needed to carry on the activity as a successful business?
Has the taxpayer made a profit in similar activities in the past?
Does the activity make a profit in some years?

From <https://www.irs.gov/uac/business-or-hobby-answer-has-implications-for-deductions>

Thanks. Should I just delete the schedule C or should I...

Countingcat — Sat, 01 Jun 2019 15:43:25 GMT

Thanks. Should I just delete the schedule C or should I need to do something else?

To delete a business you have been reporting on Schedule...

Coleen3 — Sat, 01 Jun 2019 15:43:26 GMT

To delete a business you have been reporting on Schedule C, you will stop filing the Schedule C.
You should file a “final” Schedule C in the year you ceased operations. This will permit you to “dispose” of any business assets you have been depreciating so TurboTax can calculate any gain or loss on the sale. Supplies, such as paper, inventory and raw materials, do not have to be accounted for unless you deducted the costs before and sell them.
Delete the Schedule C in the following tax year.
You should keep a record of how much depreciation you claimed (if any) for the home office space. Your basis in the home (your cost) is reduced by the amount you were able to deduct as depreciation. Although it is rare, that may have an effect on the tax consequences if and when you sell your home. If you weren't able to claim a home office deduction in any year or years (insufficient taxable income), the depreciation for those years can be ignored.