Video instructions and help with filling out and completing Which Form 4797 Excel

Instructions and Help about Which Form 4797 Excel

Hello this is jeff Hank again and this video that I'm recording and that you're watching right now is for chapter 11 of our textbook chapter 11 called property dispositions basically is broken into two parts the first part of the chapter deals with when a property is disposed of whether it's sold in these cases when it's sold the taxpayer has to determine how to treat the game or the loss of the property the second part of the chapter talks about non-taxable transactions with the focus being on the light kind exchange so we'll look at both of those of course and several other things as we go through this Chapel so when you're watching my video I would suggest that you print out a few things that I have posted one of them is the Excel spreadsheet that I created that helps determine what the gain is what the basis is when there is a like-kind exchange so print out that Excel spreadsheet and we'll talk about how that works and then I also posted two other items an example of form 4797 which shows when business property is sold and then form 6525 sorry 62-52 there's so many forms out there form 6252 which shows how an installment sale is reported so let's skin through the chapter and we'll see what else is out there and I hope this video will help you understand this chapter so as I have indicated in my postings about chapter 11 is that you are only supposed to read objectives one two three and six you can read four and five if you want to but we're just going to concentrate on objectives one two three and six basically objective one talks about when its disposition is of property and this chapter just covers the dispositions of business property whether it's a piece of equipment or a warehouse or a rental house it's just business property earlier chapters we talked about when a taxpayer loses an item meaning it's been stolen or it's been destroyed in a car accident that they are that is personal property this chapter talks about business property all right so objective one looks at the disposition of a property page eleven s2 has a term their amount realize when something happens when property is disposed of and in many of the cases in the book the property is sold there's an amount that the taxpayer realizes all right doesn't means being taxable or being paid cash on its amount realize 11 dash 3 what is the adjusted basis usually the basis of business property is what the taxpayer paid for it okay how much he or she paid for it helps determine what the basis is they talked about gifts here they talk about inherited property they talk about property converted from personal use to businesses so sometimes those things happen page dash 411 dash 4 gives you quite a few examples of what the basis is in different how property is acquired by taxpayer the important thing to look at on lemmon s3 is when personal property is converted in the business property this happens a lot when someone has a house buys another house keeps that first house that was their primary residence and turns it into a rental property which means they're turning it into business property the taxpayer would love to take the current market value of that property and turn that into business property because then it could take a lot more depreciation but the tax law says it could only be what the taxpayer paid for it which will be used for the basis for depreciation or what the market value is of that property so the market value is lower at the time of conversion to business property that is what the taxpayer has to take not how much they paid for it so that could really lower how much depreciation can be taken each year on that rental property page dash five the adjusted basis in most cases as it states on top of page that's five the adjusted basis is the initial basis less the cost recovery allowed or allowable cost recovery is just depreciation because remember i cannot expense an asset completely in one year some cases i can but most cases i can so whenever I can't expense in that year of purchase or that year of using that asset I get that cost back or recover that cost by depreciation so I pay for an asset say I pay a hundred dollars for an asset I take thirty dollars worth of depreciation over three years after those three years my adjusted basis is now seventy dollars once again I pay one hundred dollars for an asset it's a business asset I can depreciate it I'd appreciate ten dollars per year after three years i'd appreciate thirty dollars worth so the basis is now the adjusted basis is now seventy dollars one hundred dollars less thirty dollars of depreciation seventy dollar basis that's the basis i'm going to use when i sell the asset or it gets stolen or it gets destroyed but most of our cases in these chapters when i sell the asset all right now notice is on eleven dash five it says cost recovery allowed or allowable meaning the depreciation i could have taken based on the tax law this means that of a taxpayer forgets to depreciate an asset and forgets to claim that depreciation the IRS doesn't care when it's sold it's still treated as if that depreciation was taken all right so that's important it's important to make sure that everyone takes the depreciation they're entitled to all right going on example lemon dash 3 example that mad dash for it shows us how games are treated realize gain or loss on disposition that's our first step what's realized our second step is what is recognized