Can Form 4797 Beginners 2022-2023

Instructions and Help about Can Form 4797 Beginners

Hi everyone this is Phil Jaeger of Jaeger CPA Review I thought I'd go over a few sections of the Internal Revenue Code dealing with regulation that gives people trouble the first item I want to talk about is section 1231 now a section 1231 asset is a non-capital asset but it may get capital gain treatment to be a section 1231 asset first of all it must be either personal property or real property used in a trade of business and it has to be held more than 12 months now let's deal with one type of personal property using the trade of business which is held for more than 12 months that is a section 1231 asset and let's assume that we're going to sell this item and that item is equipment so we have a piece of equipment that we're going to sell selling price is $50,000 the cost of the equipment was 20,000 and we took depreciation of 4,000 dollars giving me a basis of 16,000 dollars now if I compare my selling price of 52 my base of 16 there is a gain on the sale of this asset for $34,000 now if it is a Section 1231 asset how do you treat this gain as far as whether it's ordinary capital or whatever well first of all whether you are a corporation or a sole proprietor the rule is the same as well as how you treat the gain the first thing is you got to recapture some of the gain which means that treated as ordinary income and the amount of the game that's treated as ordinary income is the depreciation taken so we took 4,000 of depreciation that 4,000 of the 35 $1,000 gain is ordinary income and it is called section...