Closing Photography Business (Sole Prop) - Selling Items

[Nashville Newborn Photographer]

I've operated a photography business (for newborns) since 2019 as a sole proprietor. I'm planning to close the business at the end of this year, and have questions about selling some of the items that I've expensed in recent tax years. 

I have many items I'd like like to sell (blankets, bonnets, etc.), and they will all sell for less than I originally paid. Can someone tell me the tax implications of selling these items? How do they get reported? For example, let's say I sell an outfit for $20 that I purchased for $100. I know Turbo Tax will walk me through the process, but I'd like to understand the tax consequences in advance. Thanks!

[Anonymous_]

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@Nashville Newborn Photographer wrote:

Can someone tell me the tax implications of selling these items?

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It is actually fairly simple; the assets (items) that you expensed have an adjusted basis of $0 and any amount you receive on a sale will result in a gain which will be taxed at ordinary income tax rates.

You report the disposition of the items as the sale of business property which will appear on Form 4797 as ordinary gain.

[Nashville Newborn Photographer]

Thank you! Glad to hear this will be simple and straightforward.

Let's say I sell 80 items at a total of $500. Does each item get reported separately... or as a total only? Trying to figure out how detailed my record-keeping needs to be.

And what happens in the reporting for the few things  I decide to keep for personal use?

[Anonymous_]

Each item should be reported separately if they are sold separately.

On the other hand, it probably makes little difference since the assets all have a basis of $0.

[Nashville Newborn Photographer]

OK! What about the few items I might want to keep for personal use (they are not high dollar items)?

[Anonymous_]

The items you retain for personal use are not reported until you actually sell them (or never reported if you simply scrap them/throw them away).

[Nashville Newborn Photographer]

OK! Thank you so much for your help!