Video instructions and help with filling out and completing When Form 4797 Properties

Instructions and Help about When Form 4797 Properties

In this video we're gonna go over Section 1231 property just a quick explanation of what it is section 1231 property or 1231 assets that's a tax term that refers to depreciable business property that's been held for over one year now the types of properties included in Section 1231 are machinery land cattle timber buildings Natural Resources crops and lease holds that are at least a year old so what section 1231 does is it kind of allows businesses to get the best of both worlds so to speak in regards to the tax treatment if their property falls within that section now it allows taxpayers to have capital gains treatment if they realize a gain on a section 1231 property and at the same time it allows the tax payer to treat any loss on any such property as ordinary loss another thing section 1231 treatment allows taxpayers to enjoy tax favored treatment for for 1231 property gains and these are gains that are greater than the losses on these properties or on such property so basically what it means as you can see here this means that an asset could be sold for a value greater than its basis then it would be taxed at a capital gains rate which is lower than the ordinary income rate but if the 1231 property results in a loss then the taxpayer can treat it as an ordinary loss and the loss can actually reduce the taxpayers taxable income so coming down like I said earlier it gives you the best of both worlds it allows a favorable tax treatment on 1231 property also avoids the negative implications of capital loss treatment so ordinary losses are a hundred percent deductible while capital losses are only subject excuse me our subject to an annual deduction limitation of $3,000 so if capital losses exceed capital gains by more than three thousand dollars in any given year only a maximum of three thousand can be deducted the excess loss over that three thousand has to be carried forward to the following year now if you there's more explanation here on this actual page if you want to keep reading there's a link below in the description that will give you the full article this is another video from accounting 101 org

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