Problem 8-6 (Algorithmic) Calculation of Gain or Loss, Section 1231 Gains and Lo
ID: 2531119 • Letter: P
Question
Problem 8-6 (Algorithmic)
Calculation of Gain or Loss, Section 1231 Gains and Losses (LO 8.3, 8.6)
Frank Willingham has the following transactions during the year:
Sale of office equipment on March 15 that cost $67,200 when purchased on July 1, 2014. Frank has claimed $13,440 in depreciation and sells the asset for $40,320 with no selling costs.
Sale of land on April 19 for $140,200. The land cost $154,220 when purchased on February 1, 2005. Frank's selling costs are $28,040.
Assume there were no capital improvements on either business asset sold. Frank's Social Security number is 924-56-5783.
Complete Form 4797 to report the above gains or losses.
Enter all amounts as positive numbers except for a "loss". If required, enter a "loss" as a negative number on the tax form. If an amount is zero, enter "0".
Explanation / Answer
Calculations to be provided in Form 4797 in respect of gain or loss from sale of assets.
Particulars
Amount ($)
Amount ($)
Amount ($)
Office equipment:
Sale proceeds
40320
Less: Sale posts
0
(A): Net sale proceeds
40320
Cost of office equipment at the date of purchase
67200
Less: Depreciation claimed
13440
(B): Basis of office equipment
53760
Gain / (Loss) on sale of office equipment (A-B)
-13440
Land:
Sale proceeds
140200
Less: Sale posts
28040
(A): Net sale proceeds
112160
Cost of land
154220
(B): Cost basis of land
154220
Gain / (Loss) on sale of land (A-B)
-42060
Total loss on sale
-55500
Particulars
Amount ($)
Amount ($)
Amount ($)
Office equipment:
Sale proceeds
40320
Less: Sale posts
0
(A): Net sale proceeds
40320
Cost of office equipment at the date of purchase
67200
Less: Depreciation claimed
13440
(B): Basis of office equipment
53760
Gain / (Loss) on sale of office equipment (A-B)
-13440
Land:
Sale proceeds
140200
Less: Sale posts
28040
(A): Net sale proceeds
112160
Cost of land
154220
(B): Cost basis of land
154220
Gain / (Loss) on sale of land (A-B)
-42060
Total loss on sale
-55500