Video instructions and help with filling out and completing What Form 4797 Analyst

Instructions and Help about What Form 4797 Analyst

Hi I'm Jeff Louisville a staff accountant with AAA accounting and today I want to talk about some of the tax considerations for selling business assets if you own a corporation you have the option of either you're selling your stock or selling the businesses assets it's generally better as the seller to sell your stock rather than selling the assets this is because you usually qualify for special beneficial tax rules on the sale of qualified small business stock if you sell the assets you don't get this beneficial treatment and instead you might be subject to depreciation recapture which I'll discuss later if you decide that you will sell your stock check out our video on disposing a small business stock if you decide to sell the assets your gain or loss will be calculated as follows the gain or loss is equal to the amount you realize minus your investment in the business the amount you realize is equal to the total of all the cash property and debt relief you receive minus any selling expenses your investment is what you paid for the business assets minus any depreciation that you were allowed for example after many years of operating a restaurant you decide to sell it at a loss to a competitor for 150 thousand dollars he also agrees to take over your bank loan of 30,000 and you have expenses on the sale of 5,000 at the time you have assets you paid 450 thousand dollars for on which you've taken 150 thousand dollars a depreciation your loss is calculated as follows the amount you realize is equal to the 150,000 dollar selling price plus the 30 thousand dollars of debt relief minus the five thousand dollars of selling expenses or 175,000 your investment is the original formula $50,000 you paid minus 150 thousand dollars of depreciation or 300,000 and your loss is simply what you got 175 minus your investment of good or 125,000 when you sell the businesses assets at a gain however you may need to recapture or report as regular income some of the depreciation you took this means that the total gain will be split up between capital gain and ordinary gain the capital gain will be taxed at either zero fifteen or twenty percent based on your tax bracket and the ordinary gain will be taxed at your marginal tax rate which varies from ten to thirty nine point six percent how much of the game is taxed at your marginal rate at how much gets capital gains treatment is based on a complex formula governed by regulations under Internal Revenue Code sections 12 31 and sections 12 45 2 12 55 if you have questions about selling a business and need advice get the tax experts at AAA accounting a call we have over 60 years of tax and accounting experience working with small businesses call us today to schedule an appointment to discuss your tax situation we can help