Capital Gains and Losses

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CLIENT SOLD A COMMERCIAL BUILDING THAT WAS OWNED PERSONALLY…

CLIENT SOLD A COMMERCIAL BUILDING...
CLIENT SOLD A COMMERCIAL BUILDING THAT WAS OWNED PERSONALLY BUT USED IN A BUSINESS BUT NEVER DEPRECIATED OR EXPENSED BECAUSE IT WAS A PERSONAL INVESTMENT THEY RECEIVED A 1099-S (PERSONALLY). DO I JUST INCLUDE SALE AS LONG-TERM CAPITAL GAIN
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Answered in 1 minute by:
3/24/2018
Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional
Category: Capital Gains and Losses
Satisfied Customers: 2,762
Experience: IRS Licensed Enrolled Agent, CDFA ® CFP ®, MBA
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Hello!

My name is***** will assist you today.

Please give me one moment while I review your question and type my initial response

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Given that the property was used for business and owned by the client personally, the client would report the gain or loss on the sale of rental property on Form 4797, Sales of Business Property.

Individuals typically use Schedule D (Form 1040), Capital Gains and Losses, together with Form 4797.

_____

Please let me know if this has answered your question or if you have any additional questions.

When you have no further questions a positive rating of 5 stars is much appreciated.

Thank you!

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Customer reply replied 4 months ago
it wasn't a rental though

If the property was used in business, then you will use Form 4797 Sales of Business Property

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Customer reply replied 4 months ago
what about depreciation recapture? it was never depreciated.

You must claim the depreciation that was "allowed or allowable." The tax payer would have to amend the previous returns to claim the depreciation that they were allowed but did not use.

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Customer reply replied 4 months ago
what of the cost needs to be included in basis to depreciate?
Customer reply replied 4 months ago
what about legal fees?

The cost of any improvements are added to the basis

Improvements.

You must capitalize any expense you pay to improve your rental property. An expense is for an improvement if it results in a betterment to your property, restores your property, or adapts your property to a new or different use

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Legal fees as part of settlement cost are also added to the basis

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Settlement fees and other costs.

The following settlement fees and closing costs for buying the property are part of your basis in the property.

  • Abstract fees.

  • Charges for installing utility services.

  • Legal fees.

  • Recording fees.

  • Surveys.

  • Transfer taxes.

  • Title insurance.

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Customer reply replied 4 months ago
that I am figuring this correct:
Land was $60,000
Legal $46,971
Constr of building $200,000
So I would add $246,971 as the portion for depreciation recapture?
Customer reply replied 4 months ago
plus an architect fee $6,300

Correct. The land is not considered for depreciation purposes.

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The architect fee is included in the basis

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Customer reply replied 4 months ago
39.5 year correct?

27.5 years

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Customer reply replied 4 months ago
its commercial property

You are correct. I apologize

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Customer reply replied 4 months ago
whew! i just about had a heart attack.

Sorry about that.

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Customer reply replied 4 months ago
No problem. I may have one more question. This whole scenario was before my time.
Customer reply replied 4 months ago
just hold on one second, please
Customer reply replied 4 months ago
nevermind... I will message again if I have further questions. Thanks for your time.

Ok! Have a great day

Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional
Category: Capital Gains and Losses
Satisfied Customers: 2,762
Experience: IRS Licensed Enrolled Agent, CDFA ® CFP ®, MBA
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Chad EA, CDFA®, CFP® and 87 other Capital Gains and Losses Specialists are ready to help you
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