Question

1. A business machine purchased February 10, 2016, for $72,000 was fully depreciated in 2016 using § 179 immediate expensing. On September 15, 2017, the sole proprietor who owned the machine gave it to his son. On that date, the machine’s fair market value was $63,000. The son did not use the machine in business or hold it as inventory and the machine was sold on November 22, 2017, for $48,000.What is the amount and nature of the gain or loss from disposition of the machine? Where is it reported in the son’s tax return?

Answer 1

In the Books of Accounts of the son there is no need to pass accounting entries for this transaction as this is not a business transaction at all. There is no consideration value received or given for it by either parties this can be treated as a gift given by father to son.

Son has not included this machine as his business asset nor as his business inventory

So there is no need to record business loss in son's books

While filing Tax Returns , this Income has to be treated as "Income from other sources" or "Miscellaneous Income"