1...One piece of depreciated equipment was sold for $2000 cash in March of this year. Should that item remain on the books until the 2010 tax year, or can I record the sale in 2009 for tax purposes? All accounting for business transactions have been done on a "cash basis." Since the business was closed in 2009, should I continue depreciating the item through March 2010?
I think it would remain on the books until sold. I would report the sale in 2010, that is when it occurred. Reporting the sale and any resulting income or loss in a different year would result in more or less taxes being paid in the year reported, versus actual transactions for that year.
You take depreciation on assets until the earlier of fully recovering your cost or retiring it from service. You retired it from service on 7/31/2009. NO depreciation should be taken after that, in my opinion. See "Retired From Service", Page 7, Pub. 946 "How to Depreciate Property", link below. http://www.irs.gov/pub/irs-pdf/p946.pdf
As far as converting business property to personal use, what type of business structure was the business, sole proprietor, partnership, or corp.?
Did anyone else invest capital in your business besides you?