If I sell an asset, how do I do the bookkeeping? This is for a small business.?

Question

I bought a computer for my sole proprietorship in 2003 for $1000. I sold it in 2006 for $300.

When I do my 2006 taxes, do I include the $300 as revenue and does it count as income?

Answer 1

The answer depends on how you treated the purchase in 2003.

If you expensed all of it (Section 179), then some of the sale price will be recaptured as income. Use Form 4797 Part IV to record the recapture.

If you depreciated it, then you record it as disposed of on your return, and again some of the sales price will be a gain since the depreciated value of the computer is less than $300. Use Form 4797 Part I to record the gain.