Example of Net Section 1231 Computation

Selling Your Business

Don't overlook these!

10 Oddball Tax Deductions

Updated for 2012

The following example will cover:

Example:

In tax year 2011 you sell your business. It includes Section 1231 property A and property B.

Here are the facts:

Property A:
- Gross sales price: $20,000
- Basis: $10,000
- Depreciation Allowed: $2,000
- Adjusted basis: $8,000
  - Basis: $10,000 minus Depreciation: $2,000.
- Total Gain: $12,000.
  - Gross sales price: $20,000 minus Adjusted Basis: $8,000
- Form 4797:
  - Enter the above information for Property A in Part III.
Property B:
- Gross sales price: $3,000
- Basis: $5,000
- Depreciation allowed: $1,000
- Adjusted basis: $4,000
  - Basis: $5,000 minus Depreciation: $1,000
- Loss: $1,000
  - Gross sales price: $3,000 minus Adjusted Basis: $4,000
- Form 4797:
  - Enter the above information for Property B in Part I
Nonrecaptured net Section 1231 losses:
- You had net section 1231 losses in the following two years that were not offset against net section 1231 gains:
  - In 2006 you had a nonrecaptured net Section 1231 loss of $1,500.
  - In 2008 you had a nonrecaptured net section 1231 loss of $2,500.
  - Total nonrecaptured net Section 1231 losses: $4,000 ($1,500 plus $2,500).

Computing Net Section 1231 Gain and Loss-Continued: Example of Section 1231 Computation-Continued (results)