Could anyone help me on this?

I buy a keyboard for $1000 in 2001. When I file for taxes I take the entire section 128 deduction. In 2003, I sell the keyboard for $700. What do I put down for depreciation.

What if I bought the keyboard in the beginning of 2003, took the deduction and sold it later in the same year at a loss.

Does anyone have a clue?

Thank you,


Beakybird

Hi Beakybird

My exgirlfriend does this for a living. She still does mine even though I'm in Florida and she's in Baltimore area. E-mail her, tell her I sent you. I think she will tell you what you need. BTW, she is a genius at this. She gets me unreal refunds.

Her name is Mary . Here's her email.

mapassino@aol.com

Best

Scott

Dear Scott, Mary's email is different now. Do you have an updated address?

BEakybird

[This message has been edited by Beakybird (edited 06-11-2003).]

You can only deduct the difference in the purchase price and the sale price.
DonM

Beakybird
http://www.smallbusinessaide.com/

She is good. The few bucks she charges at tax time makes me a bunch. She knows the loopholes like she invented them.

Scott

If you wrote the entire price off in the purchase year (as I do) then you can't depreciate it at all. The entire price was taken as a deduction. The income from the sale will then be treated as additional; income. It all balances out in the end.

Dave is right. If you write the $1,000 keyboard off as a deduction that first year--that's it--there is no depreciation. Then, if you sell the keyboard, say for $700, that counts as additional income. Essentially, this made that initial $1,000 write-off a $300 write-off. My ultimare goal in life, though there is probably not much of it remaining, is to pay $1-million in income tax on year. Oh Yeah! that would be one hell of a year.

Cheers,

Gary

I didn't read closely enough. Dave is right. That's the way I do it every year.
DonM

Actually, that is not correct. When you wrote off the original $1,000 as depreciation, that is called Accelerated depreciation which is totally legal.

When you dispose of the property, you re-capture that depreciation if there is a gain on the sale of the property. If you dispose of the equipment at less than the market value, there is NO gain and thus no tax implications. You use it to offset the the replacement property you put in service; say a new keyboard.

Bottom line, there are no tax consequences on this transaction since you offset the income you made through the accelerated depreciation expense in the year the income was made. You only claim as income, the gain you make on the sale from the original purchase which in this case is zero.

You are good to go!!!

Al

So Al,

What do you put down for depreciation on the keyboard? It looks like you're an expert, at least to me. I think that it would be helpful to other musicians on this forum if you answered the two scenarios that I mentioned.

Thank you in anticipation of your response.

Larry

Larry,

There is no more depreciation after the first year since he elected to expense or fully depreciate the entire asset.

If you sell the keyboard for 700.00 you are disposing of the asset at a loss, not a gain so there is no tax implications.

Now, if you sold the asset during the same year you expensed it, you have to calculate the number of months the assett was put in service and get a percentage. You can only take depreciation on the asset for the duration you had it in service. The whole idea is to offset the income earned with the expenses you incurred to produce that income.

Disposing of the asset only matters if you did not depreciate using section 179 depreciation expenses.

Ugh! Am I making myself clear? That's why I left the accounting industry!!!

Al






[This message has been edited by kbrkr (edited 06-12-2003).]

Al, I just don't get it. I take the full write off, and three years later, I sell the thing for $700.

My taxcut software asks for six things:

Property: That's easy, Keyboard
Acquired: That's when it was purchased, right?
Sold: That's when it was sold
Realized: ???
Depreciation: ???
Basis: ???

What would I put for these things? What do these things mean???

Beakybird

Bump. Does anyone concur with Al that you don't simply pay taxes on the full sale of the business asset if you took a full deduction the year you bought it?

Can anyone answer my questions in my last post?

Beakybird

I use Turbo Tax, and it always asked when and for how much I sell my assets. I always expense the entire cost of the keyboard in the year I buy it. I usually sell it the next year, and that sale price has been resulting in a decrease in my music equipment deductions. Maybe I've been doing it wrong?
DonM

Well it looks like in this aspect TurboTax is superior to TaxCut. Nevertheless, on the IRS form, it asks for Realized and Depreciation. In my example, what would you put? Does anyone know??

Larry

I'm no expert, but I doubt that you have to put ANYthing other than a report of the new income ($700). The depriciation is over, and the income is a separate issue. Just add $700 to the income section.

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

Al,
Maybe I misread the initial post, but I understood it to sound like this:
The keyboard was purshaced and claimed in one tax year. Then it was sold in a subsequent tax year. Wasn't that the case? In that scenario, don't you simply report the $700 as income recieved in the new tax year. You can't adjust last years depreiciation, can you?
(This is why I pay someone to do mine - too complicated)

That's the way I read it Dave. I also use Turbo Tax and looked up everything I could find on the subject. Essentially, that grand that was taken as a deduction as equipment purchases was not taxed during that tax year--it was a deduction on your schedule-C. The following year the keyboard is sold for $700--that's $700 bucks you'll have to claim so Uncle Sam can get the taxes on that amount. It ain't free money! Lets say you sold the keyboard for $2,000, but still deducted the $1,000 you paid the previous year. Accoding to my tax program's information, and according to my tax books, you just gained $2,000 in taxible income because you subtracted $1,000 from last year's gross income and didn't pay taxes on that amount. This ain't rocket science--it's just common sense.

Gary

Hello

My exgirlfriend Mary the tax specialist just answered my email:First scenario: you can not take any deduction if you took the entire section 128 deduction in 2001. By taking the entire section 128 deduction, it means that you fully depreciated it in that year (2001). Therefore, you have no depreciation left.

Second scenario: If you buy it and sell it in the same year, you can take only the depreciation for the time you had it. For example, if you have it half a year, then you get half a year depreciation. You would not have taken the deduction for depreciation because you would have not prepared your tax return before you sold it.

Hope this answers your questions.
http://www.smallbusinessaide.com/

Thanks Scott and everyone else!

Beakybird