This is not a trivial issue, and you should seek a professional advice with a EA/CPA licensed in your state. I can only describe my understanding of the law, but it can in no way be regarded as a tax advice or opinion, and you cannot rely on it in any way whatsoever.
As KeithS said, you cannot depreciate an asset bought and sold in the same year. The purchase of the asset, assuming it was indeed needed and used in the endeavor (and is ordinary and necessary for such a business) is an investment in a capital asset which is depreciated, and is not a deductible expense (unless sec. 179 applies).
The sale is a not a section 1231 sale, since you didn't hold the equipment for more than a year. It is a regular sale, reported on form 4797, and as such you can deduct the loss as short term loss.
If sec. 179 does apply, then all your gain (the difference between the adjusted basis after the deduction and the sale price) is short term gain and taxed at ordinary rates. But since you decide to choose the sec. 179 treatment at tax time, when you already know that the asset has been sold, I see no reason why to do it.