home sale with business use

[mona l]

Can any one help: Sale of home with business property before Jan 1 of 09 can be rtreated as a single sale . but depreciation from after May of 1997 has to be be reported, am I right on this and do I not use form 4797, but enter gain from dep on schedule D? Would appreciate any enlightenment on this.

[Lion]

Right

Sounds right from what you've told us. (But, I didn't sleep well last night, so brain might not be in gear yet.)

[DMICPA]

Sale of bus. use property

I sold my business-use residence and the depreciation recapture was reported on Form 4797 part 1 and this number representing the depr. flowed through to Schedule D line 11A. I reported the depreciation gain on part III of page 2 of the 4797.

Line 20 was the sale price for that area, allocated
Line 21 was the cost of the area which was set as same as the sale price
Line 22 was the depreciation allowed
Line 23 was the adjusted basis
Line 24 was the gain which is the depreciation

This figure went to page 1 of the 4797 to line 6, Line 6 went to the Schedule D.

If you received a 1099 shwoing the total sales price, I reported the number on Schedule D so it would tie out and adjusted the cost basis to arrive at the non business portion gain.

This worked for me. It showed the sale of business property, it showed the depreciation recapture.

Bob

[Davc]

You need to clarify "with business property." If the business property is part of the actual dwelling the entire transaction should be reported on Schedule D. If not, such as a detached garage or shed, then you need to split the sale and use 4797.

[Edward]

Home Sale With Business Use

Bear in mind that you must meet the 2 year rule to avoid paying taxes on the TOTAL GAIN plus the depreciation. I believe that if you reside in the home while the business is going on, for 2 out of the last 5 you meet the 2 Yr Rule. Following is example if 2 Yr rule met:

OVERALL GAIN 119,315. - LINE 32 Part III 4797
DEPRECIATION 3,315. - LINE 22 Part III 4797

Then on Line 2, col (a):

Section 121 Exclusion (250,000/500,000) -116,000

Line 6 4797 +119,315

Line 7 4797 (net of line 2 and 6) 3,315

Line 11, 15, 16, 19 SCH D 3,315

Note that on page 2 of instructions for 4797 it tells you to put the amount of the gain that is excluded from taxes (116,000) as a loss on line 2, col (g). It isn't necessary to fill in line 2, columns (b) thru (f).