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Small schedule c business donates fully depreciated

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Small schedule c business...

Small schedule c business donates fully depreciated furniture to charity. They've been told that the FMV is $1,000. What is the deduction for contributed property?

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Submitted: 9 months ago.Category: Tax
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10/14/2017
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 9 months ago
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 14,659
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Hi. Lane here.

...

Deducting depreciated assets can be more difficult than some think.

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Essentially, it requires reasonable valuation estimates, determination of tax basis and calculating the amount of ordinary income for each asset.

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Start by by estimating fair market value, (FMV). FMV is the maximum amount you can take as a charitable contribution deduction.

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IRS defines FMV as the price you can obtain from a willing, disinterested (no ownership interest or related parties) buyer at the time the donation is made.

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Next, determine the adjusted tax basis for each asset (purchase price, sales taxes and cost of freight and installation -- minus the sum of all depreciation deductions taken on the asset)

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If adjusted basis is more than an asset's FMV on the date of donation, your charitable contribution deduction is equal to its FMV.

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But when FMV is greater than adjusted basis, however, the calculation requires an additional step -- calculating how much of the difference between FMV and adjusted basis constitutes ordinary income.

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The tax rules limit the amount of your charitable deduction to the asset's FMV minus the amount of ordinary income that would result in a hypothetical sale.

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For passthroughs (Schedule C, partners, S-Corps) charitable deductions are taken as an itemized deduction on Schedule A

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 9 months ago

SO here, you're looking at the asset's FMV minus the amount of ordinary income that would result in a sale at Fair Market Value.

...

Please let me know if you have ANY questions at all

If this has helped, and you DON’T have other questions … I'd appreciate a positive rating, using the stars on your screen, and then clicking “submit" – That’s the only way I’ll be credited for the work.

...

But if you need more on this, please let me know.

Lane

I hold a law degree (J.D.), with concentration in Tax Law, Estate law & Corporate law, an MBA in finance, a BBA, and CFP & CRPS (Chartered Retirement Plans Specialist) designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice 1986

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