Sale of Assets

[ILLMAS]

TP had a towing business from 2005 to 2007, in 2008 he stopped operations completely, and in 2009 he sold the tow truck. No depreciation was calculated for 2008 and 2009 up to the sale. He paid 27K for the tow truck and he took about 11K in depreciation so his basis is 27K - 11K = 16K, he sold the tow truck for 5K, so his loss on the sale is 11K, but something doesn't seem right. Is there another way to reconginze the sale to reduce his loss, Should depreciation be calculated now for the years he was not in service to reduce his basis or should his basis be the depreciation he took for the years in service of 11K - 5K = 6K loss, 6K vs 11K is lower, don't want to cause any red flag.

Thanks

MAS

[kcjenkins]

Why do you want to "reduce his loss"? You did it right before. No depreciation taken on the years it was not 'in use'. He's entitled to take the loss, on a 4797. I don't understand why you would want to short him on his loss? What am I missing here?

[ILLMAS]

Two things that are suspious first the fact he didn't use the tow truck or at leased it for a profit, second the fmv of the tow truck is around 11k and he sold it for less. There is also a tool box I did not mention but he sold it for very little, I am not auditing him, but he is going be doing some explaing to the IRS if he gets audit.

[kcjenkins]

Unless he sold it to a relative, the actual sale is a lot more important than any FMV estimate from some book or such. Lets face it, the cost of fuel in the last couple of years flooded the market with trucks. Lots of them sat for a long time because they could get no offers, or very low offers. Which makes better business sense, sell at a loss or let it just sit? I'd vote for the sale.