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    Business Restart

    Client came by and said he did not do any work for his landscaping business. He has a couple of mowers that are depreicating. I asked him if he was closing it up completely. He said no, he was trying to get it started back in 2011 and does have a customer.

    My questions is how to handle 2010? Leave the Schedule C with the depreciation and that is it? Or should they be taken out, coverted to personal use, and then put back in for 2011?

    Thank you for any help
    Dany

    #2
    According to one of my clients who several years ago called IRS and asked this question of them because I wouldn't depreciate his carpet cleaning equipment when he had no income, you would do the depreciation and file the schedule C with the return.

    I did the amended return for him and sent it in. He never got any negative letters on the issue.

    Linda, EA

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      #3
      Sounds like the assets have been taken out of business use. I would dispose of them and then start depreciation again once he actually starts his business up again.

      [Edit] By dispose I don't mean 4797; rather you don't depreciate them for this year since he doesn't have a business.
      Last edited by MilTaxEA; 04-05-2011, 05:40 PM.
      Michael

      Comment


        #4
        Unless he had continued his best efforts to actually do business in 2010, e.g. buy a business license, seek out customers, etc, I would take the stance that he was not in business in 2010. I don't mean the assets were converted to personal use, just that there would be a one year hiatus in depreciation of them.

        This is in line with generally accepted accounting principles of matching income with expenses.
        ChEAr$,
        Harlan Lunsford, EA n LA

        Comment


          #5
          That is what I told my client. You didn't do any business during the year so you can't take depreciation.
          He called IRS and the person told him he could. I made all my notes before I did the amended return.

          I would also be of the opinion that if you don't try to work your business during the year, you don't get to take any deductions. I would just not claim depreciation until he was working his business again. I wouldn't do it for anyone again.

          Linda, EA

          Comment


            #6
            Thank you all for responding. I will follow the advice given. Had not really thought about doing it that way. Taking the depreciation did not seem correct as the business was not active but wasn't sure.

            Comment


              #7
              I was looking up something else in TTB and noticed "Idle property" on page 9-21 of the 1040 edition.
              It says:

              "Continue to claim a deduction for depreciation on property even if is temporarily idle. For example, if use of a machine stops because there is a temporary lack of a market for a product made with the machine, continue to deduct depreciation."

              Guess that is your answer.

              Linda, EA

              Comment


                #8
                Facts and circumstances - if no income because of market conditions, assets are idle. If no income because did not pursue business, assets aren't really "idle", their just is no business to use them in.
                http://www.viagrabelgiquefr.com/

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