How to properly fill out Form 4797 when closing my sole proprietorship with unsold digital assets?

So if the digital assets were like stock photos or templates that the business paid for, and now they're just personal files, we don't need Form 4797? What about depreciated equipment like computers or cameras?

For digital assets like stock photos or templates, you're right - no Form 4797 needed if you're just keeping them for personal use and not selling them. For depreciated equipment like computers or cameras, it's a bit different. If you're converting previously depreciated business equipment to personal use, you should technically report this on Form 4797. The "selling price" would be the fair market value at the time of conversion, and you'd compare that to your adjusted basis (original cost minus depreciation taken). If the fair market value exceeds your adjusted basis, you may have to recapture some depreciation as ordinary income.

Does it handle specialized scenarios? I have some partially depreciated assets from my photography business that I'm thinking about transferring to my personal use, but some were also used partly for personal stuff already.

I'm skeptical about these tax tools. Does it actually give you specific advice about YOUR situation or is it just general guidelines you could get from Google? And how does it know the right values - does it connect to your accounting software somehow?

It absolutely handles specialized scenarios like partially depreciated assets and mixed-use property. You can upload your depreciation schedules and it identifies which assets need reporting on which forms. It was especially helpful for figuring out recapture requirements. For your second question, it's definitely not general guidelines. You upload your actual documents and it gives specific advice tailored to your situation. It analyzes your specific assets, depreciation history, and business structure. It doesn't directly connect to accounting software, but you can upload reports from your accounting system and it processes those details to give you personalized guidance.

How does this actually work? I thought the IRS phone system was just a nightmare that nobody could bypass. Do they have some special connection to the IRS or something?

This sounds like BS honestly. If it was that easy to get through to the IRS, everyone would be doing it. I've tried calling dozens of times about my business closing and gotten nowhere. Hard to believe some third party service can magically get through when nobody else can.

The service works by using an automated system that navigates the IRS phone tree and stays on hold for you. When a real IRS agent comes on the line, you get a call connecting you directly to them. There's no special connection or backdoor - they're just handling the painful waiting process so you don't have to sit there for hours. I was skeptical too until I tried it. It's not magic - it's basically just automation handling the frustrating part of IRS calls. The hold times are still long, but the difference is you're not the one sitting there listening to the hold music for 3+ hours. You just go about your day and then get a call when someone's actually available to help.

What's considered "significant value" though? I have some specialized industry software licenses that cost $3000 originally but would probably sell for maybe $500 now if I could even find a buyer. Do those count?

Significant" value'isn t really an official tax term - I should have been more clear.'It s more about whether'you ve been depreciating the asset and its current fair market value. For your software licenses, it depends on how you treated them for tax purposes previously. If you expensed them when (purchased rather than capitalizing and)depreciating , then'there s likely no need to report them on Form 4797 when closing your business if'you re keeping them for personal use. If you did depreciate them, then technically the conversion to personal use is treated as "a" sale at fair market value, which would need to bereported.

Thanks for explaining - this makes sense! My accountant mentioned Section 179 but I didn't really understand what it meant for closing my business. So basically if I already got the full tax benefit when I bought the assets, there's nothing more to report when keeping them?

Exactly right! If you took the full deduction upfront through Section 179 expensing, you've already received the complete tax benefit for those assets. When you close your business and keep them for personal use, there's no additional reporting required since you're not selling them and there's no remaining basis to recover or depreciation to recapture. This is different from assets you depreciated over time, where you'd need to report the conversion to personal use. The IRS has already "been made whole" through your original deduction, so to speak.