5a - Gains &amp; Losses Overview

# 5a Gains - = \$17,700 Realized gain = \$17,700 Amount Realized – 10,000 Cost Basis = \$7,700 Gain TYPES OF GAINS& LOSSES • Capital Gains Losses

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Individual Income Tax Online Lecture Series An Overview Presented by Akore Berliner, CPA

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GAIN / LOSS FORMULA \$ Amount Realized \$ Less: Adjusted Basis = Gain or Loss Disposal of property results in Gain or Loss
AMOUNT REALIZED = Gross Sales Price less Selling expenses    = Amount received by the seller from the buyer Cash  FMV of property received Liability assumed by or paid for by the buyer

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Original cost plus : Capital improvements* less : Accumulated depreciation = Adjusted basis * Items that significantly result in increase to property value or increase useful life Adjusted Basis
CALCULATING GAIN/LOSS:  EXAMPLE   On 8/4/08, Dominic sold 326 shares of stock in Wind Farms Inc. that he had purchased 6/18/99. Cost basis = \$10,000 Sales Proceeds = \$19,000 Commission Fee = \$1,300 Calculate amount realized and realized gain .

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SOLUTION Amount realized  = \$19,000 Sales Process  – 1,300 Selling Expenses

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Unformatted text preview: = \$17,700 Realized gain = \$17,700 Amount Realized – 10,000 Cost Basis = \$7,700 Gain TYPES OF GAINS & LOSSES • Capital Gains / Losses From Sale of Capital Assets Taxed at capital gain rates Ordinary Gains / Losses From Business Operations From Sale of Ordinary Assets (Inventory, Receivables) Taxed at Ordinary income rates • Passive Gains / Losses From Passive Investments Taxed at Ordinary income rates 1231 Gains / Losses From Sale of Business Assets Gains are treated as Capital Losses are treated as Ordinary Recapture Gain Gain on property previously depreciated Taxed at 25% rate RELATED READINGS 1. IRS Publication 544 – Sales and Other Dispositions: Page 2 - 20 2. IRS Publication 551 - Basis of Assets (All) Available at www.irs.gov The End....
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## This note was uploaded on 02/01/2012 for the course ACC 2546 taught by Professor Dean during the Summer '10 term at San Diego State.

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5a Gains - = \$17,700 Realized gain = \$17,700 Amount Realized – 10,000 Cost Basis = \$7,700 Gain TYPES OF GAINS& LOSSES • Capital Gains Losses

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