Disposing of Business Assets

In this current economic climate, some small business owners are faced with shutting down their businesses.  What happens to the equipment that has been depreciated?  Some may choose to keep the equipment for his or her personal use, while others may dispose of it.    

If you plan on keeping the equipment, you are taking it out of service and there generally will be no tax consequences at that time.  However, if you had originally expensed the equipment under Sec. 179, this could result in a recapture of some of that write-off as additional income on your business schedule. 

If you decide to sell an item, then you will have to report a gain or loss based upon the remaining undepreciated basis.  On the other hand, if you scrap an item, the sales price is zero.  Another route would be to contribute an item to charity.  This gives you a charitable deduction equal to the remaining undepreciated basis. The deduction would be claimed as an itemized deduction, not a business expense.

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