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I have a tax question...My husband is a commericial

fisherman. He will be receiving...
I have a tax question...My husband is a commericial fisherman. He will be receiving a grant for a new engine. The grant is $121,000. He will receive $30,000 of it in cash. How do I report this? And they are keeping his old engine that is worth $6,000.
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Answered in 1 hour by:
3/9/2018
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 33,114
Experience: Taxes, Immigration, Labor Relations
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The grant money are reported as income for tax purposes - that amount is included into gross income.

We need to verify which form your husband as a commercial fisherman is filing - and I will direct to exact line to report.

The disposition of his old engine will be reported as a sale transaction - with deemed sale price $6,000.

So - depending on his basis in this asset - he will realize a gain or loss.

The purchase price will constitute a basis of the new engine he will purchase.

That cost will generally be depreciated.

But under some circumstances - he might be able to use section 179 deduction and deduct the full purchase cost

You might want to verify his net income before deciding whether to use this option - or spread deduction over several years.

Let me know if you need further directions.

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Customer reply replied 4 months ago
They just kept the engine. No money will be paid to him for it. So he has to claim it as though he sold it?
Customer reply replied 4 months ago
We file a schedule C on the 1040.

If there is no money given for the old engine - it will be deemed as sold at zero price - still disposition is reported - and he may have some loss form that disposition.

You will report that deemed sale transaction on form 4797.

On schedule C - include the grant amount on line 6 as Other Income

https://www.irs.gov/pub/irs-pdf/f1040sc.pdf

Depreciation deduction for a new engine will be calculated on form 4562 and reported on schedule C line 13.

Let me know if that helps.

Lev
Lev, Tax Advisor
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Customer reply replied 4 months ago
this helps. Thanks.
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