Reference no: EM133489368 , Length: 4 pages

Property Transactions Tax Return

Dean and Ellen Price are married and have a manufacturing business.

Theyboughta piece of business equipment (7-year personal property) on 4/1/2018 for $50,000. Use half-yearconvention to calculate the MACRS depreciation deduction on the equipment for 2018 and 2019

They also has apick-up truck used for business (5-year recovery period) acquired on8/23/2018for $25,000. On 11/15/2019, hesold the pick-up truck for $24,000. Use the half-yearconvention to calculate the MACRS depreciation on the truck for2018 and 2019.

On 10/26/2019 Dean sold his old storage building used for his business for $220,000. They purchased the building in 2001 for $100,000. Total depreciation (accumulated depreciation) taken on the building is $20,000.

His 2019Business income and expenditures (Schedule -C):
Sales $ 657,500

Cost of goods sold $ 315,000
Other business expenses (incl. deprecation taken on the storage building) $140,000

In 2019 Dean also sold various assets. The information about the selling price and depreciation of the property is listed below.

In 2019Dean sold his wine collection for $9,000, which is bought two years ago for $8,000.

They also has a short-term capital loss carryover of $10,000 from 2009.

Part I: MACRS Depreciations and Adjusted Basis
2018 (Year 1) :

2019 Depreciation (Year 2)

2019 Tax Basis

Part II. Summary Sheet for the Sales of Business Property (Form 4797)

Step 1) Sales or Exchanges of Property Used in a Trade or Business (Held for More Than 1 Year)

Step 2) Ordinary Gains and Losses (incl. property held 1 year or less). Enter zero if not applicable.

Step 3). Descriptions of Section 1245 property:

3 (a) Net the gains/loss in A,B,C,D____________
3 (b) Total Amount reported on (6) above:______________________
3 (c) = 3(a) - 3(b) _________ (Remaining Section 1231 Gain)

Summary Sheet for the Sales of Business Property

Step 4. Description of Section 1250 property

Part III. Summary Sheet on the Sales of Capital Assets (Form 8949)

1). Short-term
Description of property Date acquired Date Sold Gross Sales Price Depreciation allowed Cost Basis Gain or (loss)

2) Long-term
Description of property Date acquired Date Sold Gross Sales Price Depreciation allowed Cost Basis Gain or (loss)

Summary for Capital Gains and Losses:

1.Net Short-term totals
2. Net Long-term totals

Part IV: Netting Process
Short-term Capital Gains and Loss Carry-overs Long-term Capital Gain (LTCG)
Collectibles Unrecaptured § 1250 Gain Net Sec. 1231 Gain Other Long-term capital gain

Net the Short-term Capital Gain or Losses above =
_______
Amount from Part II, 4(b)
__________ Amount from Part II, 4(c)
________

Part III, Net LTCG, excluding Collectibles
_____

Use the above amount to net against Collectibles, Unrecaptured Sec. 1250 Gain, LTCG, etc. on the right

Net Capital Gain:

Part V. Self-Employment Tax Computation

2019 Net Schedule-C income (from page 2): ____________
1) Social security tax = (The lesser of Net Sch-C income or $132,900)*12.4%, round up to nearest dollar: _____________
2) Medicare tax = (Net Schedule-C business income)*92.35%*2.9%, round up to nearest dollar: ________________
Total Self-Employment Tax = V1+V2 = ___________

Part VI. Income Tax Computation
A. Net Capital Gains (NCG from page 6) ____________________
B. Other Gains (the amount for Part II 3(b) on page 3)
________
C. Taxpayer's AGI (Net Schedule-C income, NCG, Other Gains, minusone-half of Self-employment tax in Part V)
AGI __________
D. Taxable Income before Qualified Business Income Deduction (AGI - 2019 Standard Deduction for Married Filing Jointly):
_______________
E. Qualified Business Income Deduction (see page 9): __________
F: Taxable income: ________ (F=D-E)
G. Tax Computation
1) Tax based on tax rate schedule Y-1 ( useTaxable income - Net Capital Gain)
__________
What is the tax bracket (marginal rate) for them on Y-1? ____%
2) Tax on Capital Gains:
a) 28% x __________ (if any) = Tax on collectibles

b) For Unrecaptured Section 1250 gain, the applicable tax rate is the lesser of 25% or the marginal rate in step G(1) above.
Tax rate on Unrecaptured Section 1250 Gain ______* Amount of Unrecaptured Section 1250 Gain (see page 6) ____________ =________
c) Gains subject to the 15% tax rate on page 6 ___________ * 15% = ________

G(2) = Total Tax from G(2)(a)+G(2)(b)+G(2)(c) = ___________

G( 3) Total Self-Employment Tax from Part V _______

Add G(1), G(2) and G(3), this is their total tax $ ____________

Q: How is the deduction for Qualified Business Income (QBI) computed?
A: The SSTB (Specified Trade or Business) limitation does not apply if a taxpayer's taxable income is below $321,400 for a married couple filing a joint return and $160,700 for all other taxpayers in 2019; the deduction is the lesser of:
A) 20 percent of the taxpayer's QBI (Net Schedule-C income), plus 20 percent of the taxpayer's qualified real estate investment trust (REIT) dividends and qualified publicly traded partnership (PTP) income

B) 20%*(excess of taxpayer's taxable income before QBI deduction over net capital gains)
If the taxpayer's taxable income is above the thresholds, the deduction may be limited based on whether the business is an SSTB, the W-2 wages paid by the business and the unadjusted basis of certain property used by the business.