Self employed rental company. How to list stolen property that was reimbursed?

[vipermike1]

Self Employed

I owned a wedding event rental company.  I recently had around around $3000 of rental property stolen at a event.  The client did reimburse me the $3000 for the stolen items. I charged it to his credit card with my merchant account "Square".

In my intuit account the $3000 is listed as income.  Do I count this as income and then as a lost?

Because my Merchant account  "Square" will send a 1099 to the IRS as the $3000 listed as income?

Thanks

Mike

[Critter-3]

First is IS INCOME and must be reported as such.

Now to the costs of the stolen property depends on what you did ... if you replaced the equipment then you have that expense to deduct or depreciate. 

If the equipment was still being depreciated then you will take it out of service ... technically you sold the equipment to the responsible party for the amount they paid for the loss. 

[Hal_Al]

As Critter-3 said, you report the $3000, you received from the client as income.

If you replaced the items stolen, you deduct the cost of replacement.  

If you deducted the cost of the original items, when you purchase them, you do not get to deduct the cost again.  If you depreciated the original items, you deduct any depreciation not yet taken.  As Critter-3 said, you do that by reporting the item "sold" for $0. The TurboTax interview can handle the calculation. 

If the items were personal items, i.e. not  listed as business property, you cannot write off the loss. 

[vipermike1]

This was my first post on this forum. I received two very helpful clear answers in 15 minutes on a Sunday.  Also, a reply from "Critter-3".  Thank you!  I understand completely now. What a great forum. 

Mike

[Carl]

Basically, you report the equipment as "sold" to the party that paid/reimbursed you for it. If the equipment was listed in the assets/depreciation section and being depreciated, then you have to work through the asset(s) that were "sold" to report them as sold.You will be taxed on any "profit" accordingly.

Next, if you then purchased replacement equipment that needs to be classified and depreciated, you'll enter your new purchases in the Business Assets section and the "in service" date will be the date you started using the new equipment in your business. That data could be the date of purchase, or any day after you purchased and acquired the new equipment.

This is much simpler than trying to deal with this in the Casualty/Thefts section, and the end result mathamatically, is the same.

[Opus 17]

I disagree in part with the first two answers, and I agree with @Carl

How you report the situation depends on what was stolen and how you treated the property originally.  You should be classifying your business purchases either as expenses or as assets to be depreciated. In general, assets to be depreciated have a useful life of more than one year and cost more than $2500. (You can choose to depreciate durable property costing less than $2500, but most people will expense it.). Expenses are deducted immediately from your income. Assets must be depreciated over their useful lifetime and must be tracked in your tax program.  Sometimes you can take accelerated depreciation, but you must still track your assets until you dispose of them.

If the items that were stolen were assets listed on your depreciation schedule, then you will report in TurboTax that you “sold“ them to the person who paid you for them. TurboTax will work through a calculation to determine whether any of the purchase price is considered a taxable gain. Then, you must list the replacement items as new assets to put in service using the cost you actually paid and the date you placed them in service.

If the items that were stolen were items that you deducted as expenses when you purchased them (either because they were not considered durable equipment or because they cost less than $2500), then you report the payment as taxable income, the same as if you were selling other items of inventory.  If the stolen items were partly things that were expensed and partly things that were depreciated, allocate the reimbursement accordingly.