Example_gain_loss_1231_Solutions

# Example_gain_loss_1231_Solutions - 460,000 1231 gain...

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HA 4422 Chapter 11 Realized gain/loss Sale 1,000,000 Adjusted Basis -500000 (Cost 700,000 less depreciation 200,000) Realized 500000 Recognized 500000 Ordinary Inventory, Accounts Receivable Section 1231 Trade or business Real or depreciable Held > 12 months Capital Not above or something made by the taxpayer (or gifted to taxpayers by creator) Gross sales Price Cash plus FMV of property plus FMV of services plus Expenses paid by purchaser plus Seller's Debt assumed Treat like you got more cash less Expenses paid by seller less Buyers debt paid by seller Treat like you paid more Example: I sell something 500,000 Cash 50,000 FMV of car 10,000 Purchaser pays the real estate taxes I owed 200,000 Seller assumes my mortgage Sales price 760,000 The building was used in my business Cost 500000 Depreciation -200000 Adjusted basis 300000 gain

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Unformatted text preview: 460,000 1231 gain General rules: 1231 gains = capital 1231 losses = ordinary #1 recapture gains to the extent of depreciation taken If personal property 1245 200000 Recapture to extent of depreciation as ordinary 260,000 Remainder is capital Unrecaptured 1250 If real 1250 200,000 Recapture to extent of depreciation as ordinary but a maximum 25% rate 260,000 Remainder is capital #2 Net casualty gain/loss Net loss is ordinary Net gain combines with net 1231 gain/loss #3 Combine net casualty gain with Net 1231 gain/loss Net loss is ordinary Net gain have to lookback #4 Lookback I had 1231 losses: Year 1 Year 2 Year 3 100,000 100000 Ordinary gain Year 4 10,000 10,000 Ordinary gain Year 5 Year 6 sale 150,000 remainder is capital gain...
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## Example_gain_loss_1231_Solutions - 460,000 1231 gain...

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