Thanks TaxGuyBill!
I agree that I do not enter anything other than 20-24 on form 4797, it is a straight line depreciation, but 600k is sec. 1250 gain, right? Specifically, I would enter (or the final result) would be:
Line 20: 1,200,000 (Gross sale price)
Line 21: 800,000 (Cost basis plus expenses of sale which is zero in this example)
Line 22: 600,000 (Depreciation)
Line 23: 200,000 (Adjusted basis)
Line 24: 1,000,000 (Total gain)
Of the 1,000,000 total gain, 400,000 is the capital gain, and 600,000 is the sec 1250 gain. Correct? The gain on the land 100,000 is capital gain as well, so the total capital gain is 500,000.
In this case, separating land from building does not make a difference, actually, when you sell a home, no one but yourself separates the price between land and building when reporting taxes. If I do not separate, I would have:
Line 20: 1,500,000 (Gross sale price)
Line 21: 1,000,000 (Cost basis plus expenses of sale which is zero in this example)
Line 22: 600,000 (Depreciation)
Line 23: 400,000 (Adjusted basis)
Line 24: 1,100,000 (Total gain)
Of the 1,100,000 total gain, 500,000 is the capital gain, 600,000 is the sec. 1250 gain, it is the same result, but how wrong is it?
@puravidapto wrote:
Of the 1,000,000 total gain, 400,000 is the capital gain, and 600,000 is the sec 1250 gain. Correct? The gain on the land 100,000 is capital gain as well, so the total capital gain is 500,000.
In this case, separating land from building does not make a difference, actually, when you sell a home, ... Of the 1,100,000 total gain, 500,000 is the capital gain, 600,000 is the sec. 1250 gain, it is the same result, but how wrong is it?
Yes.
Yes, it is the same result in this case. However, (a) the Instructions for Form 4797 tell you to report it separately, and (b) in some cases can affect the 1231 gain/loss calculations and carryovers (if I remember correctly, that is primarily when the value decreases, but maybe there are other circumstances that I'm not thinking of).
