This can be a tricky question if you own a business and acquired an asset in some other way than by just purchasing it. This website is helpful and offers answers to many of the scenarios that business owners encounter. Link
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If so, there are many tax considerations that will impact how you want to structure the sale. The Buyer and Seller have very different interests when it comes to the tax law, so make sure you understand the offers and how it will effect you personally. This article is a good introduction to the topic.
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If you have made some income on the side the IRS will require you to report it. The question is how much can you claim as expenses. If the activity is a hobby, then you can claim expenses up to the income, but not to the point of giving you a loss. If the activity is a bona fide business, then you can claim all of your legitimate business expenses and take a loss on your tax return. This article helps explain the differences in a hobby and a business according to the IRS.
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If you have an auto, boat, or airplane that you no longer want and choose to donate it to a charity, be sure to follow these guidelines.
The charity needs to provide you with either a 1098-C [see a copy here] or a written contemporaneous acknowledgment of the contribution which states:
- The donor
- The taxpayers social security number
- The charities federal ID number
- The vehicle ID number
- A description of the vehicle
- A good faith estimate of the value of any goods or services provided by the charity in exchange for the vehicle, or if none then a statement that only intangible religious benefits were received.
- If the charity sells the vehicle, the sale must be at arm’s length, and the sales price must be listed. Your donation will be limited to the amount of sales proceeds unless it is was sold at a discount to further the purpose of the charity.
- If the charity keeps the vehicle for use, the letter must state the use and time frame the charity will use the vehicle and that the vehicle will not be transferred before the use is completed. Your donation will be the fair market value.
If the donation is greater than $5000, you will need to have a qualified appraisal done on the vehicle. This appraisal will be attached to your return when you claim the donation.
Keep in mind that donated vehicles are an area that the IRS has cracked down on because of abuse, and that claiming this deduction will increase your chance of being audited. This shouldn’t discourage you from taking the deduction, but just encourage you to make sure you do everything by the books.
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Be careful that your car meets the cash for clunkers standards. Apparently the EPA adjusted their numbers at the last minute and some cars that qualified before do not meet the standards now.
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If you've wanted to open a Roth IRA because of the long term tax benefits but have been told no by the IRS because of your income levels, then there is a limited time opportunity for you. You can make a non-deductible traditional IRA contribution in 2009, and convert it to a Roth IRA in 2010. This is a back-door method that is available in 2010 only. You will owe tax on the growth in the traditional IRA when you make the conversion. The conversion of the original contribution amount ($5000) will be tax free since it was nondeductible to begin with. For more info, click here.
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If you claim the standard deduction because it requires less documentation and paperwork, the IRS has something to say to you. They are adding a new form for those who take the standard deduction, but who also claim some of the optional additional deductions like real estate taxes. This will likely apply to those who have a small or no mortgage interest deduction, but do own a home (retired individuals generally). So much for tax code simplification I guess.
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