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Old 06-10-2016, 06:03 PM
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sale of business property

my grandmother has a residential rental property that was put into service 1/1/1977. gross sale price was 14,599.00 of which 1599.00 was for land.
i don't have a depreciation schedule but i do know by some paper work that acrs depreciation was used. she sold the property 2/6/2016 for gross amount of 64,578.00. of course, the house was fully depreciated out. there was no closing close at all. tried to do some research and since it was depreciated using acrs, do u think there is any uncaptured 1250 additional depreciation that needs to be declared after 1975 and pay ordinary taxes on or just fill in 4797, part III which in turn would go to schedule D as long term capital gain. thanks a lot. alan



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Old 06-10-2016, 10:27 PM
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I guess MANY MANY TPs get confused on between sec 1250 expensing and unrecaptured depreciaiton taxed as ordinanry incoem at 25% ;correct you need to recapture sec 1250 depreciation; but rememebr; Section 1250 depreciation recapture differs in that the maximum tax rate that applies is currently 25 % The recapture applies to the full amount of the original cost that you claimed as depreciation on the rental home.as you said,
Use Form 4797 Part III to report the gain on the sale of the home. Note that line 26 relates to ordinary income recapture and does not apply to your sale. Instead the 1250 recapture is used when applying the tax rates using Sch D and f 8949 (when you get 1099-S).



The IRS calculates recapture on the depreciation that you were legally allowed to claim whether or not you actually claimed it. The best way to get out of paying recapture is to use the proceeds from the sale of your rental property to buy another piece of investment property that is the same size or larger. Structuring your transaction as a 1031 exchange and following the IRS's rules for that process lets you carry your proceeds, and your tax basis, forward into a new property without paying depreciation recapture or capital gains taxes.actually, Sec 1250 recapture may apply when residential rental real property was acquired after 1975 and before 1987 and accelerated depreciation was taken. Gain, I mean net gain, on the disposition of section 1250 property is treated as ordinary income to the extent of additional depreciation allowed or allowable on the property.however, You will not have additional depreciation if the property was residential rental property placed in service after 1986 (or after July 31, 1986, if the choice to use MACRS was made); you held it longer than 1 year; and, if the property was qualified property, you made a timely election not to claim any special depreciation allowance. These properties are depreciated using the straight line method. But you still must recapture unrecaptured depreciation taken previously even under S/L method as ordinary income just like sec 1250 depreciation .



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Old 06-12-2016, 01:27 PM
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been doing a little research on sale of business property. if u separate building and land in the sell price, shouldn't the land part be reported in part I of form 4797 or not? then the building part in reported in part III of form 4797? going to take a course on the subject to educate myself a little. thanks winhough



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Old 06-12-2016, 01:35 PM
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sale of rental property

Quote:
Originally Posted by Wnhough View Post
I guess MANY MANY TPs get confused on between sec 1250 expensing and unrecaptured depreciaiton taxed as ordinanry incoem at 25% ;correct you need to recapture sec 1250 depreciation; but rememebr; Section 1250 depreciation recapture differs in that the maximum tax rate that applies is currently 25 % The recapture applies to the full amount of the original cost that you claimed as depreciation on the rental home.as you said,
Use Form 4797 Part III to report the gain on the sale of the home. Note that line 26 relates to ordinary income recapture and does not apply to your sale. Instead the 1250 recapture is used when applying the tax rates using Sch D and f 8949 (when you get 1099-S).



The IRS calculates recapture on the depreciation that you were legally allowed to claim whether or not you actually claimed it. The best way to get out of paying recapture is to use the proceeds from the sale of your rental property to buy another piece of investment property that is the same size or larger. Structuring your transaction as a 1031 exchange and following the IRS's rules for that process lets you carry your proceeds, and your tax basis, forward into a new property without paying depreciation recapture or capital gains taxes.actually, Sec 1250 recapture may apply when residential rental real property was acquired after 1975 and before 1987 and accelerated depreciation was taken. Gain, I mean net gain, on the disposition of section 1250 property is treated as ordinary income to the extent of additional depreciation allowed or allowable on the property.however, You will not have additional depreciation if the property was residential rental property placed in service after 1986 (or after July 31, 1986, if the choice to use MACRS was made); you held it longer than 1 year; and, if the property was qualified property, you made a timely election not to claim any special depreciation allowance. These properties are depreciated using the straight line method. But you still must recapture unrecaptured depreciation taken previously even under S/L method as ordinary income just like sec 1250 depreciation .
should the land portion of the sale be reported in part I of 4797 and the building part in part III of 4797 or not? if so the only problem is how do u know how much the land would be when u sold the property



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Old 06-12-2016, 02:28 PM
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should the land portion of the sale be reported in part I of 4797=======>>>Correct; as you know, you must report the sale of the land separately from the sale of the structure/building.so you need to report the sale of the land on Form 4797, Part I of form 4797.



and the building part in part III of 4797 or not? =========>>>>>>>>How you report the sale of the building depends ;If it?s a loss, you need to report the sale on Form 4797, Part I.If it?s a gain, you should report the sale on Form 4797, Part III.

if so the only problem is how do u know how much the land would be when u sold the property===========>>>>>>>>>>to find it out you need to fill in line 2 on form 4797 part 1.you need to know the purchase/sales price or etc



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