Beaky,

Once again: The $700 sale of your keyboard is NOT income. It is a disposition of property. You cannot claim a full year depreciation on the entire $1000 since you sold the asset for $700 during the year. As I said earlier, you can only claim part of the depreciation expense for the number of months the keyboard was placed in service used to produce income. You may offset your income, by the depreciation of the 1/12 * 1000. When you sell the keyboard for 700, you disolved the asset WITHOUT any gain therefore there is NO FURTHER INCOME TO YOU. You may have to re-capture part of the depreciation on the original 1000, but there is a form you have to fill out to calculate that.

Sorry, but my best advice at this point is for you to seek professional assistance from an accountant. Don't mess with father IRS, or he'll bite you on the arse.

Al