Transcription
SALE OF BUSINESSASSETSTaking the Mystery Out of Form 4797
Form 4797 – IntroductionRecapture ordinary incomeOrdinary income§1245§1250Other recapture2
Form 4797Do NOT report on Form 4797Sale of inventoryGoodwill acquired or created before 8/10/93Sale of a partnership interest-Schedule DSale of C or S corporation stock-Schedule DException §1244 stock3
Form 4797 – §1231Net §1231 gainNet §1231 loss§1231 loss for prior 5 yearsUnrecaptured §1250 gain4
Form 4797 – Check the ComputerForm 4797-Net §1231 lossesRecaptureSchedule D-Net §1231 gains5
Form 4797Part I – most property held more than 1 yearLong-term assets sold at a lossNondepreciable long-termassets sold at a gainIncome from Part III,line 32Nonrecapture net §1231losses from prior years6
Form 4797Part II – ordinary gains and losses-Assets held less than 1 yearAll ordinary gains or lossesIncome from Part III, line 317
Form 4797Part III – property under sections §§1245, 1250,1252, 1254 & 1255Long-term asset greater than 1 year withdepreciation-Calculate recaptureCalculate §1231 gain8
§1245 RecaptureTangible personal propertyGain due to depreciationAllowed or allowableOrdinary income9
§1245 RecaptureExample-5-year MACRS propertyPurchased January 1, 2010 for 30,000Accumulated depreciation 13,000Sold January 2, 2011 for 24,00010
§1250 RecaptureTangible real propertyBased on year placed in service-ADR depreciationACRS depreciationMACRS depreciation11
§1250 RecaptureExample-Purchase price 40,000Accumulated ACRS depreciation 25,000Accumulated SL depreciation 18,000Sales price 32,000- 17,000 ( 32,000 - 15,000) gain-** 7,000 ( 25,000 - 18,000) is §1250 recapture 10,000 is unrecaptured §1250 gain12
Form 4797Part IV – recapture amounts under §§179 &280F(b)(2)Recapture-§179§280F(d)(2)*Listed propertyBusiness use drops to 50%or less13
Form 4797 SummaryNet §1231 gain-Part I, line 9Schedule DNet §1231 loss or ordinary income-Part II, line 18bFront page 1040,1120, 1120S & 106514
Unrecaptured §1250 gainGain due to depreciationCapital gain-Maximum 25% rateSchedule D, line 1915
Unrecaptured §1250 GainExample-Commercial buildingPurchase price 65,000Accumulated depreciation 6,000Sales price 100,00016
Thank youDon’t forget to stop by the NATP booth in theEXPO Hall for a handout related to this session
Long-term asset greater than 1 year with depreciation - Calculate recapture - Calculate §1231 gain 8 §1245 Recapture Tangible personal property Gain due to depreciation. Allowed or allowable. Ordinary income. 9 §1245 Recapture Example - 5-year MACRS property - Purchased January 1, 2010 for 30,000 -
