How can I contribute furniture as start up capital to my new business if I do not have receipts for them?
May.21, 2010 in
furniture
Hi,
I am have just formed a new company in my home and want to contribute my old furniture (in addition to money) as a start-up investment. This furniture is about 4 months old and I do not have any receipts for them. I do have CC statements though.
1) Can I contribute this furniture as start-up assets to my business?
2) How do I decide FMV for the furniture if I do not have receipts?
Thanks
May 21st, 2010 at 8:56 am
You should start by reading the IRS rules for home office expense, and deciding if the furniture qualifies as being deductible. Personally, I wouldn’t try to take a tax deduction for it unless it was in an area of my home designated as the office, and 100% used for that purpose. If the furniture is in your living room and used partially for business use and partially for personal use, the IRS will see a red flag if you get audited.
If you do have a deductible home office, then the furniture in that office can be treated as a capital asset and depreciated over the life of the furniture. You may also be able to deduct the entire amount right away using Section 179 depreciation expense.
It seems the credit card statements could serve as proof of your cost. However, since it has only been four months you might also be able to get your retailers to provide you with copies of the receipts.
I would take a reasonable percentage of the furniture’s cost to assign market value. If it is only 4 months old, it is probably in near new condition. Nevertheless, it has gone down in value somewhat. I think they say a car goes down in value by as much as 25% when you drive it off the lot. Seems like you could value the furniture at 70-90% of what you paid for it, depending on its condition, since it is so new.
An even better way of valuing the furniture might be to decide what depreciation would be over the life of the furniture, then compute the amount attributable to the 4 months of home use and reduce the cost of the furniture by that amount. I hope this helps.