I’ve read the various instruction documents available from IRS, and I can’t figure out how to do something. Perhaps someone on this board either knows the answer or can refer me to a resource (preferably free or low cost, like a book) where I could find the answer.
Here’s the problem:
As you may know, in addition to my full time pennywhistle tweaking business, I have a part time business buying, renovating and selling house trailers. For this business, I file a Schedule C (Profit or Loss from Business) with my 1040 tax return. On the back of the Schedule C, I record the inventory at the beginning and end of the year and determine the cost of goods sold for the year.
This year, I would like to take one of the mobile homes I have reported on Schedule C inventory for previous years, remove it from inventory and begin using it for storage and as a workspace. I’ve decided that this particular trailer needs too much renovation and is too old to sell, even fully renovated, but it would make a good work/storage space, so I don’t expect to ever sell it for a profit.
If I simply went out and bought a trailer, put it to use immediately and didn’t inventory it, it would be simple to report. I would report it as a Section 179 business expense on the front of Schedule C. It would qualify because it is tangeable personal property within the dollar limit allowed for Section 179 expenses. However, I can’t find any instruction on how you account for taking something out of inventory, using it in carrying out the business, and reporting it as a Section 179 expense.
Here’s a link to Schedule C (Adobe Acrobat Reader required), in case you want to see the form.
http://www.irs.gov/pub/irs-pdf/f1040sc.pdf
Thanks in advance for your help.
Best wishes,
Jerry
P.S. I hope I’m not out of line in asking this. I can’t think of anywhere else to go with the question, and I’ve been continually amazed by the depth of knowledge on this board.
Don’t have a tax accountant, huh? Anyway, neither do I. In situations like this, I find it best to pretend that you mailed the form in and it got lost in the mail – if they don’t buy that then tell 'em that you never got the form in the first place. Chances are they probably couldn’t care less. And, besides, what’s the worst thing that could happen to you? It’s not like they’re going to send you to jail or anything. 
Think what you just saved in accountant’s fees. Whether it’s legal, medical or any type of profession, free advice is the best! BTW, that large, nasty looking mole on your left shoulder that keeps oozing – I wouldn’t worry about it – I’m sure it’s nothing. 
But then, what the heck do I know.
Will O’Ban
PS: Jerry, obviously I was joking. For this type of thing I get my advice from the folks who get paid for knowing what they’re talking about. I don’t know about you, but when I’ve let a lay person do something for me at a discounted price, I’ve generally ended up paying more to the “pro” to make the botched job correct than I would have paid if I had hired the “pro” in the beginning.
Jerry,
If you like to keep things simple (my favorite way of dealing with the IRS), list your trailer in the inventory amount on your Sch C, line 35 (to match last year’s ending inventory) and then list the value again on line 39 (other costs). You could make a note beside Line 39, which would be mainly for yourself, that this is for storage. You eliminate the need to go through 179 expense and remove it from your inventory – yet take the entire cost in one year. Does that help or make sense? While not a CPA, I have worked as an income tax preparer for 20+ years – and that’s a fairly simple way to handle it. I’m sure you’ll get other advice. My Dad (he is the tax accountant) says if you ask 50 IRS agents the exact same question, you will get 50 different answers 
… Good luck!
~Judy
Hi, Judy.
That does make sense.
The amount will be about $6800, which will reduce my profit from that business for the year by a significant percentage. In case anyone from IRS looks at my return, does that seem like the best way to show it, or is there a more complicated way to do it that would nonetheless show it as a Section 179 expense?
Thanks for your help.
Best wishes,
Jerry
Jerry, I’ve sent you an email. Hope you find it useful. 
~Judy