Trucking company client had a lemon law settlement (repurchase) for a truck they purchased for $51,000. They stopped doing business at the very end of 2018. The total recovery amount after they turned in their truck was $143,311. (this is their lemon law refund for $30,985., the 55% of the additional damages in the amount of $75,398., plus their loan payoff for $36,928.,) The law firm will receive the 45% of the additional damages in the amount of $61,689. I know that I should report the settlement under the trucks depreciation, sch. C as a sale and they will pay tax on depreciation allowed or allowable less their adjusted basis. Should I report the entire amount of $143,311. as the sales price for that asset or is some of the settlement not taxable? Can I deduct the attorney fees on sch. A 2% to California? I would have to include their schedule C for the 2019 tax year. Grateful for your feedback.
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I would enter the depreciable asset in as if it were still in the business. Original cost, accumulated depreciation, prior 179 and sda. Then do the sale as a 4797 with the attorney fees as a cost of sale. All of it is incident to the Schedule C activity and should be treated exactly the way it would have been done if the business were still active.
I would enter the depreciable asset in as if it were still in the business. Original cost, accumulated depreciation, prior 179 and sda. Then do the sale as a 4797 with the attorney fees as a cost of sale. All of it is incident to the Schedule C activity and should be treated exactly the way it would have been done if the business were still active.
Thank you George,
Your feedback is appreciated.
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