Starting Your Business/Keeping Tax Records
What Are Business Assets
Basis for Assets
Property used in the conduct of a trade or business, such as
business machinery and office furniture.
Basis
of Assets. Your cost or purchase price of property
is usually its basis for figuring gain or loss from its sale or
other disposition. However, if you got the property by gift, inheritance,
or in some way other than buying it, you must use a basis other
than its cost. For more information about basis, Publication
551, Basis of Assets.
Adjusted
basis. The adjusted basis of your property is your original
cost or other basis plus certain additions, and minus certain
deductions such as depreciation and casualty losses.
Depreciation.
Depreciation is a loss in the value of property over the time
the property is being used. Events that can cause property to
depreciate include wear and tear, age, deterioration, and obsolescence.
You can get back your cost of certain property by taking deductions
for depreciation. This includes equipment you use in your business
or for the production of income by taking deductions for depreciation.
If property you acquire to use in your business has a useful
life of more than one year, you generally cannot deduct the entire
cost as a business expense in the year you acquire it. You must
spread the cost over more than one tax year and deduct part of
it each year.
Who
Can Claim Depreciation
What
Can Be Depreciated
What
Cannot Be Depreciated
When
Depreciation Begins and Ends
How
To Claim Depreciation
Straight
Line Method
Modified
Accelerated Cost Recovery System (MACRS)
How
To Get More Information
Sale
or Other Disposition of Assets. A sale is a transfer
of property for money or a mortgage, note, or other promise to
pay money. An exchange is a transfer of property for other property
or services.
Ordinary
or Capital Gain or Loss for Business Property
Forms to file. When you dispose of property, you will
usually have to file one or
more of the following forms:
Schedule
D (Form 1040), Capital Gains and Losses.
Form
4797, Sales of Business Property.
Form
8824, Like-Kind Exchanges.
Important References:
Publication
551
Basis of Assets
Publication
583
Starting a Business and Keeping Records
Publication
334
Tax Guide for Small Business
Publication
946
How to Depreciate Property
Form
4562
Depreciation and Amortization
Instructions
for 4562
Schedule
C (Form 1040)
Profit or Loss from Business
Publication
544
Sale or Other Disposition of Assets
Form
4797
Sales of Business Property
Instructions
for 4797
Schedule
D (Form 1040)
Capital Gains and Losses
Form
8824
Like-Kind Exchanges