US Tax Question: Equipment bought for business, never used, junked in 2007?

This US tax question pertains to a schedule C business.

About a dozen years ago I purchased a (used) machine for my business to supplement another I had. The demand never materialized and over the years both became obsolete. Attempts to sell either failed and I junked the original machine in 2006. It was fully depreciated so nothing else needed to be done.

However, I never depreciated or expensed the 2nd machine since it never got used. I junked it in early 2007. How should I handle this tax-wise? I don't think it makes sense to do a 4562 since it never entered service. I was thinking of just making it an item of additional expense on the back of Sched. C and attaching a statement that explains it more fully. The amount is only $600 and it is not an item that would lend itself to personal use. It would be nice to recover a bit of the expense. Does this sound like the proper way to go about it?

You've done everything correct so far - the machine should not be depreciated since it was never placed in service. Thus, you have a remaining basis of $600 in the equipment. Technically, by junking the machine you have a loss on a disposition of business equipment. Such a loss should be reported on form 4797 (sale or disposition of business equipment). However, for $600 it's really not worth filing a 4797. That said, I think reporting it on page 2 of the schedule C with a description such as "equipment expense" is sufficient.

The ultimate tax consequenses will be the same regardless of whether it's reported on the 4797 or page two of the Sch C.

Charge it off as un-usable equipment as long as no depreciation was ever taken.
If it was on the books as an asset, remove it.


This should not be any consequence.