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tax implications of replacing equipment that still has value

lindadod0626
Level 3

Client files schedule C for his business.  He is replacing some equipment that is not fully depreciated. How do I handle this? 

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Accepted Solutions
TaxGuyBill
Level 15

If it is junked, enter a $0 sale price.  If it is given away, enter the disposition date and leave the sales price BLANK to stop the depreciation (you don't get to claim a loss if it is gifted away).

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5 Comments 5
Just-Lisa-Now-
Level 15
Level 15
Disposal of what he has, purchase of what he buys.

Whats he doing with the old equipment?

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
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lindadod0626
Level 3

He's not selling it.  he is either junking it or giving it away, usually to one of his wife's students.  

When he buys something new now, I have started asking him about how long he thinks it will last so I can expense at least part of it via 179.  Graphic designers have to stay really up to date on hardware; no computer lasts five years with that kind of use.  

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TaxGuyBill
Level 15

If it is junked, enter a $0 sale price.  If it is given away, enter the disposition date and leave the sales price BLANK to stop the depreciation (you don't get to claim a loss if it is gifted away).

BobKamman
Level 15

Apparently that's the correct way, although it shows up on Form 4797.  If depreciation could be continued, that would appear on Schedule C and reduce SE tax.  So using Sec 179 and other accelerated depreciation methods is usually the best choice -- or using a business entity that does not file Schedule C.  

lindadod0626
Level 3

Thanks so much.  I didn't feel like he should benefit from depreciation on something he doesn't have, but I couldn't figure out how to do it.  

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