Tax Time! Some quick questions for those who do their own taxes at DVinfo.net

Nick Weeks · January 1st, 2007, 12:02 PM

OK, I'm a sole proprietor as far as the IRS is concerned (LLC), so I'm filling out the 1040 Long Schedule C

I've depreciated my video equipment and PC that I bought in 2005 using MACRS, but I've sold one of the cameras I purchased in 2005 in 2006, and I owned it for 1 year and 2 months. Do I need to report this sale on form 4797? Or is there somewhere to report it on form 4562?

I'm still sorta new the the whole depreciation thing if you haven't noticed... :)

Also, I bought some equipment in 2006 and sold it in 2006 having owned it for less than a year, so it was never depreciated on my form 4562 from 2005 and it won't be depreciated in 2006 either. Do I report these sales on form 4797 under section 2? ...because I will be claiming the income from these sales under my gross receipts

Any help would be appreciated, and please refrain from suggesting an accountant, I prefer to do my own taxes.

Thank you

John Miller · January 1st, 2007, 12:32 PM

I'd start here: http://www.irs.gov/businesses/small/...137026,00.html

Re using an accountant - my wife is an accountant and runs her own company specializing in the recording industry. She's dealt with many clients who, for years, "did their own". For a modest fee, she has found deductions, corrected mistakes etc that more than recoup the cost of her services. Most of these clients (some are household names) have been astonished and now insist on using her services.

Jim Michael · January 1st, 2007, 12:35 PM

If you sell a depreciated asset the money from the sale is treated as income and is therefore taxable.

[edit] And John's right. I did my own taxes for years but after disassociating my business taxes from personal taxes (corp) I leave the business stuff in the hands of a CPA who knows the true meaning of the words on the forms.

Nick Weeks · January 1st, 2007, 04:13 PM

Jim,

Do I include this income under gross receipts or other income? Also, what do I do if the sale is a loss? Where is it claimed?

Thanks for the help

Chris Hurd · January 2nd, 2007, 10:46 AM

Just a reminder to all -- legal questions are often asked here (most often in reference to copyright). Just like those situations, any advice people offer here on DV Info Net or any other internet forum -- whether they are accountants or lawyers, or not -- is just personal opinion, which may or may not have any merit whatsoever in your case. Please remember that you and only you are responsible for your legal and financial matters. If you choose to solicit and accept advice on the internet based on an incomplete picture of your accountancy and tax situation, instead of from an accountant you've retained, you and only you are accepting whatever risk comes with that decision. Had to be said,

Mike Teutsch · January 2nd, 2007, 11:08 AM

Quote:

Originally Posted by Jim Michael

If you sell a depreciated asset the money from the sale is treated as income and is therefore taxable.

[edit] And John's right. I did my own taxes for years but after disassociating my business taxes from personal taxes (corp) I leave the business stuff in the hands of a CPA who knows the true meaning of the words on the forms.

I was in business for 12 years and bought hundreds of thousands of dollars in equipment for use by the business. Sold the business about 5 years ago for a nice price. In all of that time, I was never audited or questoned by the IRS. Why, I think it is because I never did my own taxes.

JMHO---Mike

Don Donatello · January 2nd, 2007, 12:12 PM

"If you sell a depreciated asset the money from the sale is treated as income and is therefore taxable."

( based on what i know which could be wrong = see a real tax person = i too use tax person)
true AND - if you depreciate over 5 years ...lets say the equipment cost 5000 new ..you depreciate 1000 per year .. you sell the camera after 1 year ( you did 1 year depreciating= 1000) for $3000 then you do NOT add 3000 income you actually have a 1000 loss ...only if the total value of equipment was depreciated ( ie: the whole 5000 ) then you add the total sale as income ...or you sold equipment for 4500 then you would add 500 profit to your income ( you paid 5k - depreciated 1k = 4k depreciate value left on camera - sold for 4500 = 500 profit )...

buying equipment in 2006 ie: say for a project(s) and selling it after the project you then would have a LOSS = you report what you paid and amount you sold = loss/profit ...

Jim Michael · January 2nd, 2007, 04:58 PM

I'm so glad my CPA does this. The info that the money from the sale of a depreciated asset gets treated as income came from my CPA. The mechanics of that I leave to him -- too many variables and too easy to screw something up. So, what Chris said, and Mike, and Don.

January 1st, 2007, 12:02 PM	#1
Nick Weeks Major Player Join Date: Jan 2006 Location: Birmingham, AL USA Posts: 722	Tax Time! Some quick questions for those who do their own taxes OK, I'm a sole proprietor as far as the IRS is concerned (LLC), so I'm filling out the 1040 Long Schedule C I've depreciated my video equipment and PC that I bought in 2005 using MACRS, but I've sold one of the cameras I purchased in 2005 in 2006, and I owned it for 1 year and 2 months. Do I need to report this sale on form 4797? Or is there somewhere to report it on form 4562? I'm still sorta new the the whole depreciation thing if you haven't noticed... :) Also, I bought some equipment in 2006 and sold it in 2006 having owned it for less than a year, so it was never depreciated on my form 4562 from 2005 and it won't be depreciated in 2006 either. Do I report these sales on form 4797 under section 2? ...because I will be claiming the income from these sales under my gross receipts Any help would be appreciated, and please refrain from suggesting an accountant, I prefer to do my own taxes. Thank you

January 2nd, 2007, 10:46 AM	#5
Chris Hurd Obstreperous Rex Join Date: Jan 2001 Location: San Marcos, TX Posts: 27,366 Images: 513	Just a reminder to all -- legal questions are often asked here (most often in reference to copyright). Just like those situations, any advice people offer here on DV Info Net or any other internet forum -- whether they are accountants or lawyers, or not -- is just personal opinion, which may or may not have any merit whatsoever in your case. Please remember that you and only you are responsible for your legal and financial matters. If you choose to solicit and accept advice on the internet based on an incomplete picture of your accountancy and tax situation, instead of from an accountant you've retained, you and only you are accepting whatever risk comes with that decision. Had to be said, __________________ CH Search DV Info Net \| 20 years of DVi \| ...Tuesday is Soylent Green Day!

January 1st, 2007, 12:32 PM	#2
John Miller Major Player Join Date: Oct 2005 Location: Hillsborough, NC, USA Posts: 968	I'd start here: http://www.irs.gov/businesses/small/...137026,00.html Re using an accountant - my wife is an accountant and runs her own company specializing in the recording industry. She's dealt with many clients who, for years, "did their own". For a modest fee, she has found deductions, corrected mistakes etc that more than recoup the cost of her services. Most of these clients (some are household names) have been astonished and now insist on using her services.

January 1st, 2007, 12:35 PM	#3
Jim Michael Major Player Join Date: Dec 2005 Posts: 895	If you sell a depreciated asset the money from the sale is treated as income and is therefore taxable. [edit] And John's right. I did my own taxes for years but after disassociating my business taxes from personal taxes (corp) I leave the business stuff in the hands of a CPA who knows the true meaning of the words on the forms.

January 1st, 2007, 04:13 PM	#4
Nick Weeks Major Player Join Date: Jan 2006 Location: Birmingham, AL USA Posts: 722	Jim, Do I include this income under gross receipts or other income? Also, what do I do if the sale is a loss? Where is it claimed? Thanks for the help

January 2nd, 2007, 12:12 PM	#7
Don Donatello Hawaiian Shirt Mogul Join Date: Nov 2001 Location: northern cailfornia Posts: 1,261	"If you sell a depreciated asset the money from the sale is treated as income and is therefore taxable." ( based on what i know which could be wrong = see a real tax person = i too use tax person) true AND - if you depreciate over 5 years ...lets say the equipment cost 5000 new ..you depreciate 1000 per year .. you sell the camera after 1 year ( you did 1 year depreciating= 1000) for $3000 then you do NOT add 3000 income you actually have a 1000 loss ...only if the total value of equipment was depreciated ( ie: the whole 5000 ) then you add the total sale as income ...or you sold equipment for 4500 then you would add 500 profit to your income ( you paid 5k - depreciated 1k = 4k depreciate value left on camera - sold for 4500 = 500 profit )... buying equipment in 2006 ie: say for a project(s) and selling it after the project you then would have a LOSS = you report what you paid and amount you sold = loss/profit ...

January 2nd, 2007, 04:58 PM	#8
Jim Michael Major Player Join Date: Dec 2005 Posts: 895	I'm so glad my CPA does this. The info that the money from the sale of a depreciated asset gets treated as income came from my CPA. The mechanics of that I leave to him -- too many variables and too easy to screw something up. So, what Chris said, and Mike, and Don.