Description
He bought a manufacturing equipment (7-year personal property) on 4/1/2011 for $50,000. Use half-year
convention to calculate the MACRS depreciation deduction on the equipment for 2011 and 2012
He also has a pick-up truck used for business (5-year recovery period) acquired on 10/1/2011 for
$25,000. On 11/15/2012, he sold the pick-up truck for $24,000. Use the half-year convention to calculate
the MACRS depreciation on the truck for 2011 and 2012.
On 10/26/2012 Dean sold his old storage building used for his business for $220,000. He purchased the
building in 2001 for $100,000. Total depreciation taken on the building is $20,000.
His 2012 Business income and expenditures (Schedule -C):
Sales
$655,000
Cost of goods sold
$ 315,000
Other business expenses (incl. 2012 deprecation taken on the storage building) $ 140,000
In 2012 Dean also sold various assets. The information about the selling price and tax basis of the
property is listed below.
Asset
Sold
Initial
Basis
2012
Depreciation
Amount
Accumulated
Depreciation
4/4/11
10/16/12
$3,000
$375
$825
$2,900
3/1/10
11/8/12
$8,000
$1,000
$2,200
$4,000
Marketable
securities
2/1/12
12/1/12
$12,000
$0
$0
$20,000
Land held for
investment
7/1/11
11/29/12
$45,000
Black leather sofa
(used in office)
Office chairs
Placed in
Service (or
purchased)
$0
Selling
Price
$0
In 2012 Dean sold his wine collection for $9,000, which is bought two years ago for $8,000.
He also has a short-term capital loss carryover of $10,000 from 2009.
1
$48,000
Property Transactions: Tax Return Due Tu 3/4/14
Name: ___________
Class time: ____________
1. Use the worksheet below to calculate the MACRS depreciation amount for the manufacturing
equipment and pick truck:
2011:
Business
Asset
Date
Acquired
Date
Disposed
Basis for
applying
MACRS
MACRS
percentage
2011 MACRS
Depreciation
Deduction
Date
Acquired
Date
Disposed
Basis for
applying
MACRS
MACRS
percentage
2012 MACRS
Depreciation
Deduction
Business
Equipment
Pick-up
Truck
2012:
Business
Asset
Business
Equipment
Pick-up
Truck
2
Accumulated
Depreciation
Adjusted
Basis
Property Transactions: Tax Return Due Tu 3/4/14
Name: ___________
Class time: ____________
2. Summary Sheet for the Sales of Business Property (Form 4797)
I) Sales or Exchanges of Property Used in a Trade or Business (Held for More Than 1 Year)
Description
of property
Date
acquired
Date Sold
Gross Sales
Price
Depreciation
allowed
Cost/Adjusted
Basis
Gain or (loss)
A)
B)
C)
D)
II) Ordinary Gains and Losses (incl. property held 1 year or less). Enter zero if not applicable.
Description
of property
Date
acquired
Date Sold
Gross Sales
Price
Depreciation
allowed
Cost/Adj.
Basis
Gain or
(loss)
III) Gain from Disposition of Property Under Sections 1245 and 1250
a. Descriptions of section 1245 property:
1)
Description
of property
3
2)
3)
4)
5)
6)
Date
acquired
Date
Sold
Gain
Depreciation
allowed
Amount of
Gain
reported as
Ordinary
Income
7)
Remaining
Gain =
(4) – (6)
Property Transactions: Tax Return Due Tu 3/4/14
4
Name: ___________
Class time: ____________
Property Transactions: Tax Return Due Tu 3/4/14
Name: ___________
Class time: ____________
(Continued) Summary Sheet for the Sales of Business Property (Form 4797)
b. Description of section 1250 property
1)
Description
of property
2)
3)
4)
5
6)
Date
acquired
Date Sold
Gain
Depreciation
allowed
Amount of
Gain
reported as
25% rate
Capital gain
7)
Remaining
Gain =
(4) – (6)
IV) Section 1231 Netting Process
1. Total amount reported on part I. (page 3) __________________________
2. Total ordinary income reported on III.a _______________________
3. Subtract line 2 from line 1, this is the amount of the remaining Section 1231 Gain ____________
5
Property Transactions: Tax Return Due Tu 3/4/14
Name: ___________
Class time: ____________
3. Summary Sheet on the Sales of Capital Assets (Form 8949)
I. Short-term
Description
of property
Date
acquired
Date Sold
Gross Sales
Price
Depreciation
allowed
Cost Basis
Gain or
(loss)
Date
acquired
Date Sold
Gross Sales
Price
Depreciation
allowed
Cost Basis
Gain or
(loss)
II. Long-term
Description
of property
6
Property Transactions: Tax Return Due Tu 3/4/14
Name: ___________
Class time: ____________
4. Summary Sheet for Capital Gains and Losses (Schedule D)
1.Short-term totals from Form 8949 (page 5)
2.Long-term totals from Form 8949 (page 5)
3.Long-term totals from Form 4797, part IV). 3 on
page 4
Short-term Capital
Gains/Losses and
capital loss carryovers
Long-term Capital Gain
28%
Net Capital Gain/Losses ____________
7
25%
15%
Property Transactions: Tax Return Due Tu 3/4/14
8
Name: ___________
Class time: ____________
Property Transactions: Tax Return Due Tu 3/4/14
Name: ___________
Class time: ____________
5. Tax Computation
1. Compute the self-employment tax for Dean Price in 2012
Social security tax = 113,700*12.4% =
Medicare tax = Schedule-C income*92.35%*2.9%=
2. What is the amount of AGI for Dean Price in 2012?
3.Assume that he has items deduction of $33,000 and claims one personal exemption. What is his 2012
taxable income? The personal exemption amount for 2012 is $3,800.
9
Property Transactions: Tax Return Due Tu 3/4/14
Name: ___________
A. Capital Gains:
1) Net 15% Rate Long-term capital gain
_____________
2) Net Unrecaptured Section 1250 Gain (25% Rate Gain) _____________
3) Net Collectibles Gain _____________
B. Ordinary Income Computation
1) Realized Gain from disposition of property under Section 1245 ________
2) Total ordinary income (including the amount in B.1 above) :
C. Tax Computation
1)
Tax on ordinary income (schedule X):
____________
2) Total Tax on Capital Gains: _____________
3) Self-Employment Tax: __________________
Add C.1 C.2 and C.3. This is the Total Tax : ___________
10
____________
Class time: ____________
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