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01-12-2017 03:49 PM
I claimed the full amount for Section 179 Deduction last year. I sold that equipment to fund this year's purchase. So, I have two questions regarding that situation. First, do I have to do anything regarding last year's deduction? Second, where/how do I claim selling that equipment as "income" on this year's return?
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01-13-2017 12:41 PM
If you purchased equipment that is similar in kind and purpose as that which you sold, and the sale and purchase was related, then what you have is known as a "like-kind exchange." Such exchanges may be non-taxable, or partially taxable, depending on whether unlike property (e.g. cash) was involved.
The good news is that in a non-taxable like-kind exchange, you won't have to repay the Section 179 deduction. However, it will have a significant impact on the basis of the new equipment. You'd probably will have to complete form 8824 for this transaction. I recommend that you visit a tax professional to help with the tax aspects of this transaction.
Hope the foregoing is helpful.
01-15-2017 08:49 PM
Welcome to our forum:
If you sold the property and then used the proceeds to purchase new property, you do not have a like kind exchange.
You will need to report the sale in part IV of form 4797 ( recapture of 179 deduction.) The difference between the 179 deduction and what the depreciation would have been had you not used the 179 deduction needs to be recaptured and will then be reported as other income on your business return.
Hope this helps