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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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TaxGuyBill
Level 14

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 Replies 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 14

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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BobKamman
Level 14

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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