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Part 4 Publication 334 (2009), Guide Small Bussine
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 Posted 12:31 PM Feb. 28, 2010 Table of Contents If you dispose of business property, you may have a gain or loss that you report on Form 1040. However, in some cases you may have a gain that is not taxable or a loss that is not deductible. This chapter discusses whether you have a disposition, how to figure the gain or loss, and where to report the gain or loss. Publication
Form (and Instructions)
See chapter 12 for information about getting publications and forms. A disposition of property includes the following transactions.
For details about damaged, destroyed, or stolen property, see Publication 547, Casualties, Disasters, and Thefts. For details about other dispositions, see chapter 1 in Publication 544. Nontaxable exchanges. Certain exchanges of property are not taxable. This means any gain from the exchange is not recognized and you cannot deduct any loss. Your gain or loss will not be recognized until you sell or otherwise dispose of the property you receive.
Like-kind exchanges. A like-kind exchange is the exchange of property for the same kind of property. It is the most common type of nontaxable exchange. To be a like-kind exchange, the property traded and the property received must be both of the following.
Report the exchange of like-kind property on Form 8824, Like-Kind Exchanges. For more information about like-kind exchanges, see chapter 1 in Publication 544.
Installment sales. An installment sale is a sale of property where you receive at least one payment after the tax year of the sale. If you finance the buyer's purchase of your property, instead of having the buyer get a loan or mortgage from a third party, you probably have an installment sale.
For more information about installment sales, see Publication 537, Installment Sales.
Sale of a business. The sale of a business usually is not a sale of one asset. Instead, all the assets of the business are sold. Generally, when this occurs, each asset is treated as being sold separately for determining the treatment of gain or loss.
Both the buyer and seller involved in the sale of a business must report to the IRS the allocation of the sales price among the business assets. Use Form 8594, Asset Acquisition Statement Under Section 1060, to provide this information. The buyer and seller should each attach Form 8594 to their federal income tax return for the year in which the sale occurred. For more information about the sale of a business, see chapter 2 of Publication 544.
Table 3-1. How To Figure a Gain or Loss
Basis, adjusted basis, amount realized, fair market value, and amount recognized are defined next. You need to know these definitions to figure your gain or loss. Basis. The cost or purchase price of property is usually its basis for figuring the gain or loss from its sale or other disposition. However, if you acquired the property by gift, inheritance, or in some way other than buying it, you must use a basis other than its cost. For more information about basis, see Publication 551, Basis of Assets.
Adjusted basis. The adjusted basis of property is your original cost or other basis plus certain additions, and minus certain deductions such as depreciation and casualty losses. In determining gain or loss, the costs of transferring property to a new owner, such as selling expenses, are added to the adjusted basis of the property.
Amount realized. The amount you realize from a disposition is the total of all money you receive plus the fair market value of all property or services you receive. The amount you realize also includes any of your liabilities that were assumed by the buyer and any liabilities to which the property you transferred is subject, such as real estate taxes or a mortgage.
Fair market value. Fair market value is the price at which the property would change hands between a buyer and a seller, neither having to buy or sell, and both having reasonable knowledge of all necessary facts.
Amount recognized. Your gain or loss realized from a disposition of property is usually a recognized gain or loss for tax purposes. Recognized gains must be included in gross income. Recognized losses are deductible from gross income. However, a gain or loss realized from certain exchanges of property is not recognized. See Nontaxable exchanges, earlier. Also, you cannot deduct a loss from the disposition of property held for personal use.
You must classify your gains and losses as either ordinary or capital gains or losses. You must do this to figure your net capital gain or loss. Generally, you will have a capital gain or loss if you dispose of a capital asset. For the most part, everything you own and use for personal purposes or investment is a capital asset. Certain property you use in your business is not a capital asset. A gain or loss from a disposition of this property is an ordinary gain or loss. However, if you held the property longer than 1 year, you may be able to treat the gain or loss as a capital gain or loss. These gains and losses are called section 1231 gains and losses. For more information about ordinary and capital gains and losses, see chapters 2 and 3 in Publication 544. If you have a capital gain or loss, you must determine whether it is long term or short term. Whether a gain or loss is long or short term depends on how long you own the property before you dispose of it. The time you own property before disposing of it is called the holding period.
Table 3-2. Do I Have a Short-Term or Long-Term Gain or Loss?
For more information about short-term and long-term capital gains and losses, see chapter 4 of Publication 544. Report gains and losses from the following dispositions on the forms indicated. The instructions for the forms explain how to fill them out. Dispositions of business property and depreciable property. Use Form 4797. If you have taxable gain, you may also have to use Schedule D (Form 1040).
Like-kind exchanges. Use Form 8824, Like-Kind Exchanges. You may also have to use Form 4797 and Schedule D (Form 1040).
Installment sales. Use Form 6252, Installment Sale Income. You may also have to use Form 4797 and Schedule D (Form 1040).
Table of Contents Your general business credit for the year consists of your carryforward of business credits from prior years plus the total of your current year business credits. In addition, your general business credit for the current year may be increased later by the carryback of business credits from later years. You subtract this credit directly from your tax. Publication
See chapter 12 for information about getting publications and forms. All of the following credits are part of the general business credit. The form you use to figure each credit is shown in parentheses. You will also have to complete Form 3800. Agricultural chemicals security credit (Form 8931). This credit applies to qualified agricultural chemical security expenses paid or incurred by eligible agricultural businesses. For more information, see Form 8931.
Alcohol and cellulosic biofuel fuels credit (Form 6478). This credit consists of the alcohol mixture credit, alcohol credit, small ethanol producer credit, and cellulosic biofuel producer credit. For more information, see Form 6478.
Alternative fuel vehicle refueling property credit (Form 8911). This credit applies to the cost of any qualified fuel vehicle refueling property you placed in service. For more information, see Form 8911.
Alternative motor vehicle credit (Form 8910). This credit consists of the following credits for certain vehicles you placed in service. For more information, see Form 8910.
Biodiesel and renewable diesel fuels credit (Form 8864). This credit applies to certain fuel sold or used in your business. For more information, see Form 8864.
Carbon dioxide sequestration credit (Form 8933). This credit is for carbon dioxide which is captured at a qualified facility and disposed of in a secure geological storage or used in a qualified enhanced oil or natural gas recovery project. For more information, see Form 8933.
Credit for employer social security and Medicare taxes paid on certain employee tips (Form 8846). This credit is generally equal to your (employer's) portion of social security and Medicare taxes paid on tips received by employees of your food and beverage establishment where tipping is customary. The credit applies regardless of whether the food is consumed on or off your business premises. For more information, see Form 8846.
Credit for employer differential wage payments (Form 8932). This credit provides certain small businesses with an incentive to continue to pay wages to an employee performing services on active duty in the uniformed services of the United States for a period of more than 30 days. For more information, see Form 8932.
Credit for employer-provided childcare facilities and services (Form 8882). This credit applies to the qualified expenses you paid for employee childcare and qualified expenses you paid for childcare resource and referral services. For more information, see Form 8882.
Credit for increasing research activities (Form 6765). This credit is designed to encourage businesses to increase the amounts they spend on research and experimental activities, including energy research. For more information, see Form 6765.
Credit for small employer pension plan startup costs (Form 8881). This credit applies to pension plan startup costs of a new qualified defined benefit or defined contribution plan (including a 401(k) plan), SIMPLE plan, or simplified employee pension. For more information, see Publication 560, Retirement Plans for Small Business (SEP, Simple, and Qualified Plans).
Credit for affected Midwestern disaster area employers (Form 5884-A). This form relates to the employee retention credit and employer housing credit. See the form for more information, including the timeframe applicable for the credits.
Disabled access credit (Form 8826). This credit is a nonrefundable tax credit for an eligible small business that pays or incurs expenses to provide access to persons who have disabilities. You must pay or incur the expenses to enable your business to comply with the Americans with Disabilities Act of 1990. For more information, see Form 8826.
Distilled spirits credit (Form 8906). This credit is available to distillers and importers of distilled spirits and eligible wholesalers of distilled spirits. For more information, see Form 8906.
Empowerment zone and renewal community employment credit (Form 8844). You may qualify for this credit if you have employees and are engaged in a business in an empowerment zone or renewal community for which the credit is available. For more information, see Form 8844 and Publication 954.
Energy efficient appliance credit (Form 8909). This credit is available for manufacturers of eligible appliances. For more information, see Form 8909.
Energy efficient home credit (Form 8908). This credit is available for eligible contractors of certain homes sold for use as a residence. For more information, see Form 8908.
Indian employment credit (Form 8845). This credit applies to qualified wages and health insurance costs you paid or incurred for qualified employees. For more information, see Form 8845 and Publication 954.
Investment credit (Form 3468). The investment credit is the total of the following credits. For more information, see Form 3468.
Low sulfur diesel fuel production credit (Form 8896). This credit is for the production of low sulfur diesel fuel by a qualified small business. For more information, see Form 8896.
Low-income housing credit (Form 8586). This credit generally applies to each new qualified low-income building placed in service after 1986. For more information, see Form 8586.
Mine rescue team training credit (Form 8923). This credit applies to training program costs you pay or incur for certain mine rescue team employees. For more information, see Form 8923.
New markets credit (Form 8874). This credit is for qualified equity investments made in qualified community development entities. For more information, see Form 8874.
Nonconventional source fuel credit (Form 8907). This credit is for qualified coke and coke gas you produced and sold to an unrelated person during the tax year. For more information, see Form 8907.
Orphan drug credit (Form 8820). This credit applies to qualified expenses incurred in testing certain drugs for rare diseases and conditions. For more information, see Form 8820.
Qualified plug-in electric drive motor vehicle credit (Form 8936). This credit is for new qualified plug-in electric drive motor vehicles placed in service during the tax year. For more information, including information on what is considered as a qualified plug-in electric drive motor vehicle, see Form 8936.
Qualified plug-in electric vehicle credit (Form 8834, Part I only). This portion of the credit is for certain qualified plug-in electric vehicles. See Form 8834 for more information, including information on what is considered as a qualified plug-in electric vehicle.
Qualified railroad track maintenance credit (Form 8900). This credit applies with respect to qualified railroad track maintenance expenditures paid or incurred during the tax year. For more information, see Form 8900.
Renewable electricity, refined coal, and Indian coal production credit (Form 8835). This credit is for the sale of electricity, refined coal, or Indian coal produced in the United States or U.S. possessions from qualified energy resources at a qualified facility. For more information, see Form 8835.
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