Hello,
This is my first post. So good to find a group like this.
Maybe I've been staring at this problem too long... I'm confused.
My client closed his schedule c retail biz on October 1, 2017 after 6 or 7 years in biz. (I'm preparing his 2017 return)
He was behind on his rent by about $50K. His landlord allowed him to leave behind all the fixtures and equipment he had bought for the business to satisfy his back rent. This also included all the "leasehold improvements" he made before he opened the biz.
Please confirm I am thinking about this correctly, reporting the disposition of the assets as a sale on 4797:
Leasehold improvements:
cost: 100642
acc depr: $33381
adj basis: $67261
purchase price allocation: 80% of $50K rent owed = $40,000
outcome on 4797: loss of $27261
Fixtures and Equipment
cost $24398
accumulated depr: $24107
adj basis: $291
purchase price allocation: 20% of $50K rent owed = $10,000
outcome on 4797: gain of $9709
Also, should the $50k "purchase price" of the assets then be shown as rent paid on Schedule C? Or is that double dipping?
Related question: He was also amortizing $60k in startup costs. Through the date he shut down the biz he had amortized about $20k. Is it correct to treat the remaining $40k of startup cost as ordinary loss on Form 4797?
Thanks so much (in advance) to everyone for your help.
Deb