How to report?

[Catherine]

Client with Sch C business bought a new iPhone in February 2015 for the business.  Come August, he managed to drop it out of the car while on the freeway and had to go buy a replacement.  

• Form 4562 with asset bought and "sold" for $0 in same year?
• Form 4797 for the destroyed/lost phone with $0 sale price and 4562 for replacement phone only?
• Casualty loss (but then how to tie to Sch C not the 1040)?
• Bundle the costs for the two phones (lost and replacement) and depreciate as a single item with purchase date of first?
• "Other expense" on Sch C for cost of lost phone and 4562 for replacement phone?
• Something I have not listed?

Thanks!

Catherine

[NECPA in NEBRASKA]

How much did he have to pay for each phone? That would help me to know how I would handle it and what % of business use are they using?

[jklcpa]

How much were the phones? I'm guessing the cost exceeded the $500 deminimus safe harbor for 2015.  With the IRS raising the safe harbor to $2500 in 2016 and offering audit protection of not challenging earlier implementation of the threshold, I might be inclined to expense these.

"Effective for taxable years beginning on or after January 1, 2016, the Internal Revenue Service in Notice 2015-82 increased the de minimis safe harbor threshold from $500 to $2500 per invoice or item for taxpayers without applicable financial statements. In addition, the IRS will provide audit protection to eligible businesses by not challenging the use of the $2,500 threshold for tax years ending before January 1, 2016 if the taxpayer otherwise satisfies the requirements of Treasury Regulation § 1.263(a)-1(f)(1)(ii)."

Edited June 17, 2016 by jklcpa
added quote from IRS page

[michaelmars]

also, its expected to be replaced within 10 years