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Ask Lane Your Own Question
Category: Tax
Satisfied Customers: 12698
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Were to report gain on sale of residence used partly for

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Were to report gain on sale of residence used partly for business?
JA: The Expert will know how to help. Please tell me more, so we can help you best.
Customer: Long term gain; deprec taken since 1999 $11,515. Original purch price $80,000. Sale price $155,000
JA: Is there anything else important you think the Expert should know?
Customer: Taxpayer sold old residence in 2016 and purchased new residence same year.

Hi - Prior to issuing corrective regulations in December 2002, the IRS operated under the rule that, if you used your residence for both personal and business purposes, you would be treated as having sold two separate properties for purposes of using the home sale gain exclusion: a personal residence and a business building.


The profit you realize on the sale of your home would be entitled to the $250,000/$500,000 exclusion, but any profit you realize on the sale of the business part of your property would be taxed.


But now, if the business use occurred within the same dwelling unit, the portion of your gain subject to tax is the amount of depreciation you deducted in the past as a home office expense.


SO now only the 11515 is recaptured. If it was straight line it's at the recapture rate of 25%. The rest of the gain is excluded under §121.

You'll report the recapture on form 4797.


Please let me know if you have ANY questions at all, before rating me.

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I hold a law degree (J.D.), with concentration in Tax Law, Estate law & Corporate law, an MBA in finance, a BBA, and CFP & CRPS (Chartered Retirement Plans Specialist) designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice 1986

Customer: replied 30 days ago.
Do I need to report the recapture in Part I, II, or III of Form 4797 and do I also report gross sales, adjusted basis, etc?

Part III and use only the depreciation amount as price and basis

This is 1250 property

Lane and other Tax Specialists are ready to help you
Customer: replied 29 days ago.
I am working this thru my tax software before I credit the Expert.