What Form 4797 Analyst 2024-2025

Hi, I'm Jeff Louisville, a staff accountant with AAA Accounting. 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 selling your stock or selling the business's 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 of 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 $150,000. 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 $450,000 for, on which you've taken $150,000 in depreciation. Your loss is calculated as follows: The amount you realize is equal to the $150,000 selling price plus the $30,000 of debt relief minus the $5,000 of selling expenses, or $175,000. Your investment is the original $450,000 you paid minus $150,000 of depreciation, or $300,000. Your loss is...