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Old 02-23-2018, 05:03 PM
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What figures are needed?

My Dad just sold his business property last year for $42,000 which consisted of 4.5 acres and buildings which were valued by the county at $42,000 which land was valued at $38,000 and buildings at $5,000. My Dad retired about 10 years ago and the property has been vacant.
Please bear with me because this is where it gets tough. My Dad is 87 and forgetful. I am trying to complete his taxes and need information which he does not have or remember. He bought the property in about 1965 for $3220 (I think) but put it in service in 1968 for his business. I am not sure how much he depreciated and/or if I have to recapture the depreciation - it cannot be much considering the $3220 cost? He knows he owes tax and is willing to pay so on a worst case basis what information should I enter to finish his taxes without being dishonest - in other words to pay the maximum tax? Any help will be appreciated. Thank you.



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Old 02-24-2018, 11:26 AM
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Please bear with me because this is where it gets tough. My Dad is 87 and forgetful. I am trying to complete his taxes and need information which he does not have or remember. He bought the property in about 1965 for $3220 (I think) but put it in service in 1968 for his business. I am not sure how much he depreciated and/or if I have to recapture the depreciation ========>>yes aslongas you dispose of the biz use b/d at a gain then you need to recapture the unrecaptured expense as ordinary income taxed at 25% ; Because commercial real estate is considered an asset rather than an expense, the IRS won't let you write off its cost in the year you buy it. Instead, the agency requires you to decrease its value every year by a small amount to simulate its gradual loss of value as it deterioratesWhat you need to do is depreciate the entire cost of the building over the course of a 39-year schedule; since the b/d was put in svc in 1968, then whole of $3220 was already deprecated so you need to recapture the wholeof $3220 as ordinary income. To estimate depreciation and calculate gain reportable as ordinary income, the owner should keep records that include the date and circumstances of the acquisition, the cost, and other adjustments that may affect the tax basis.
Even if owners try to avoid the recapture tax, they are subject to taxation on any appreciation that is "allowable." In other words, they will still have to pay whether they took the deduction or not.
- it cannot be much considering the $3220 cost?======>as mentioned previously. Commercial land, on the other hand, is not depreciable, because the IRS looks at land as something that doesn't deteriorate over time. Since your father usually buy buildings and land together, he will need to allocate the value that he pays for the property between the building and land. It's best to get an accountant's advice on how to do this in a way that both maximizes your depreciation while also being able to pass muster with the IRS. If your faTHER had made improvements to land so he could place a building on it, those improvements are depreciable over 15 years The basis of THE BIZ PTY can increase or decrease due to various changes in its useful life. Thus, the ?adjusted basis? of a property is its original cost basis after certain tax-allowed adjustments. These adjustments include costs for capital improvements that increase basis while depreciation deductions decrease the basis of a real estate asset.

He knows he owes tax and is willing to pay so on a worst case basis what information should I enter to finish his taxes without being dishonest - in other words to pay the maximum tax? =========>>you donotneed to pay the max tax however, you need topay tax as muchas he ownes to IRS/his home state;
Assuming that the commercial property has appreciated from the time that your father bought it, he will be subject to capital gains tax of sec 1231 gain on the entire gain. Since he has held it for over one year, it qualifies as a long-term capital gain and is typically taxed at the 15 % rate aslongas his tax bracket is higher than 15% and the tax rate is 0% if his tax bracket is 15% or lower. As said, While your father owned the commercial property, he was allowed to depreciate it. Depreciation is a way of gradually reducing a building's value as it ages and is "used up." As he sells it for more than its depreciated value, he will also have to pay tax on the amount that he depreciated. In other words, if your father took a million dollar property, wrote off $300k in depreciation and sold it for $1.1 million, he would have a $100k of sec 1231 gain , capital gain and $300k in accumulated depreciation, also referred to as a Section 1250 gain. Section 1250 gains are federally taxed at 25 percent
if you are not very confident in filing return for him you may contact an IRS ENROLLED aGENT/A cpa doing taxes in your local area for professinal help.



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Old 02-24-2018, 11:29 AM
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Quote:
Originally Posted by Speedymdl View Post
My Dad just sold his business property last year for $42,000 which consisted of 4.5 acres and buildings which were valued by the county at $42,000 which land was valued at $38,000 and buildings at $5,000. My Dad retired about 10 years ago and the property has been vacant.
Please bear with me because this is where it gets tough. My Dad is 87 and forgetful. I am trying to complete his taxes and need information which he does not have or remember. He bought the property in about 1965 for $3220 (I think) but put it in service in 1968 for his business. I am not sure how much he depreciated and/or if I have to recapture the depreciation - it cannot be much considering the $3220 cost? He knows he owes tax and is willing to pay so on a worst case basis what information should I enter to finish his taxes without being dishonest - in other words to pay the maximum tax? Any help will be appreciated. Thank you.
________________________________________
My Dad just sold his business property last year for $42,000 which consisted of 4.5 acres and buildings which were valued by the county at $42,000 which land was valued at $38,000 and buildings at $5,000. My Dad retired about 10 years ago and the property has been vacant.
lease bear with me because this is where it gets tough. My Dad is 87 and forgetful. I am trying to complete his taxes and need information which he does not have or remember. He bought the property in about 1965 for $3220 (I think) but put it in service in 1968 for his business. I am not sure how much he depreciated and/or if I have to recapture the depreciation ========>>yes aslongas you dispose of the biz use b/d at a gain then you need to recapture the unrecaptured expense as ordinary income taxed at 25% ; Because commercial real estate is considered an asset rather than an expense, the IRS won't let you write off its cost in the year you buy it. Instead, the agency requires you to decrease its value every year by a small amount to simulate its gradual loss of value as it deterioratesWhat you need to do is depreciate the entire cost of the building over the course of a 39-year schedule; since the b/d was put in svc in 1968, then whole of $3220 was already deprecated so you need to recapture the wholeof $3220 as ordinary income. To estimate depreciation and calculate gain reportable as ordinary income, the owner should keep records that include the date and circumstances of the acquisition, the cost, and other adjustments that may affect the tax basis.
Even if owners try to avoid the recapture tax, they are subject to taxation on any appreciation that is "allowable." In other words, they will still have to pay whether they took the deduction or not.
- it cannot be much considering the $3220 cost?======>as mentioned previously. Commercial land, on the other hand, is not depreciable, because the IRS looks at land as something that doesn't deteriorate over time. Since your father usually buy buildings and land together, he will need to allocate the value that he pays for the property between the building and land. It's best to get an accountant's advice on how to do this in a way that both maximizes your depreciation while also being able to pass muster with the IRS. If your faTHER had made improvements to land so he could place a building on it, those improvements are depreciable over 15 years The basis of THE BIZ PTY can increase or decrease due to various changes in its useful life. Thus, the ?adjusted basis? of a property is its original cost basis after certain tax-allowed adjustments. These adjustments include costs for capital improvements that increase basis while depreciation deductions decrease the basis of a real estate asset.

He knows he owes tax and is willing to pay so on a worst case basis what information should I enter to finish his taxes without being dishonest - in other words to pay the maximum tax? =========>>you donotneed to pay the max tax however, you need topay tax as muchas he ownes to IRS/his home state;
Assuming that the commercial property has appreciated from the time that your father bought it, he will be subject to capital gains tax of sec 1231 gain on the entire gain. Since he has held it for over one year, it qualifies as a long-term capital gain and is typically taxed at the 15 % rate aslongas his tax bracket is higher than 15% and the tax rate is 0% if his tax bracket is 15% or lower. As said, While your father owned the commercial property, he was allowed to depreciate it. Depreciation is a way of gradually reducing a building's value as it ages and is "used up." As he sells it for more than its depreciated value, he will also have to pay tax on the amount that he depreciated. In other words, if your father took a million dollar property, wrote off $300k in depreciation and sold it for $1.1 million, he would have a $100k of sec 1231 gain , capital gain and $300k in accumulated depreciation, also referred to as a Section 1250 gain. Section 1250 gains are federally taxed at 25 percent



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