Sale of expensed assets

"Whit" wrote

You can lump it all together if you like. There's no impact to the bottom line, and the tax reporting is the same regardless if you keep those sales separate from depreciable asset sales.

Would there be some use of that information for the Organization or any other users of the financial statements?

Thanks Paul... no, there is no value to anyone at all in separating out the information. I think what made me unsure about this was that all the examples I could find, and all the instructions for the 990, address depreciable assets, so I was concerned that there might be some completely different way of handling the sale of expensed property.

On the 990, it asks for the proceeds and "cost or other basis". Am I correct in thinking that since these items were expensed, the basis is zero for all this stuff? The cost has already been "used up" to offset income long ago. Besides which, who would keep track of the costs for this junk?? and I don't know why they care, anyway, since we're tax exempt.

Whit

"Whit" wrote

It's not income in the ordinary course of the Organization's business, so it should be a Schedule D type of "gain" result. I suppose for things like supplies, they'd be considered to be short term. You could also just show the receipts as a reduction in the corresponding expense line.

Yup, zero basis as it's already been expensed.

Correct reporting helps to determine if the income IS exempt. Not all exempt organizations activities result in exempt income (see unrelated business activity income / tax), so seeing the sources of income may help in deciding if there is UBIT due.

Proper reporting also helps potential donors if they look up your organization's return on sites like Guidestar, etc. Where your money comes from (how you earn it) and where it goes to (how you spend it) is important. There's a level of comfort in knowing that the organization is able to generate enough from it's activities to maintain itself, and that any large donation isn't going to make next weeks payroll, but for the purposes of.....whatever non-profit purpose the organization does. Seeing the organization selling off stuff - a fire sale maybe - might be a little shaky to the potential donor, wondering if you'll be around long enough to get the check. More disclosure might be appropriate than less, and not for tax purposes (as you said, you're tax exempt), but for p/r donor purposes.

There's a place on the first page of the 990-EZ (and, I assume, somewhere on the 990 as well) to show gain/loss form the disposition of assets other than inventory. A schedule is to be attached, but, as an indicator of what the IRS thinks is important, the revised 990 seems to not be concerned with breaking down amounts below $10,000 (if memory serves) and we're talking about a total of less than $2000 in this case. I attached a schedule, but it lumped things together into categories. Nobody really cares that we sold an instructional poster for $1.00.

Some of our supplies have been on the shelf for 5 or 10 years. The office manager liked to take advantage of "deals", so if staples were cheaper in packs of 10 boxes, we got 10 boxes. Nine were still on the shelf years later. Same with Post-Its, index cards, tape... you get the picture.

Fortunately, gains and losses on the disposition of property are, with a few exceptions, excluded from UBIT (pub 598, p10), plus this was not a "trade or business regulary carried on", so that won't be an issue for us.

I neglected to mention that the non-profit has merged with another non-profit (after selling off all this old junk), so, as it turns out, donations aren't an issue either!

I appreciate your responses; thanks for the help. The 990 is done and in the mail. Just in time, too!

More disclosure - especially in these times - is better than less (I agree with Paul). Your explanation of some of the 'overstocked' items being sold was informative.

From someone who isn't very good at accounting, make sure you have your own books reflect exactly what happened. I've ended up spending long hours tracking down items lumped into miscellaneous (or "I'll do it later") accounts. Much better to over-document, than to under- document. Your successor might have the same question some day, and if you record it, he can get his answer there, and maintain consistency of procedure.