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Discussion:How to fill out form 4797 (line 22)

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Discussion Forum Index --> Tax Questions --> How to fill out form 4797 (line 22)


Joshs (talk|edits) said:

8 January 2007
Hello - I sold a piece of equipment this year and I don't know how to fill out form 4797.

Here's the details.

Purchased in 2002 for $20,000. I did a section 179 on the entire amount.

In 2003, I did a like kind echange of this equipment. I added $2,000 on the trade and did a section 179 on this amount.

In 2006, I sold this machine for $20,000.

Here's how I think it should be filled out: Line 20 Gross Sale Price - $20,000 Line 21 Cost Basis - $0 (I assume this should be 0 since I fully depreciated it alreay) Line 22 Depreciation (or depletion) allowed or allowable - ??? ( I don't know what this should be)

From there it's just calculations I think. I would much appreciate any help anyone can give.

Thank You - Josh

Dennis (talk|edits) said:

8 January 2007
You are going to have $20,000 in ordinary income as a result of the sale. Technically this will consist of depreciation recapture to the extent of depreciation that would have been allowable absent the §179 deduction and §179 recapture for the rest. You might as well consider the entire $22,000 for line 22. It's wrong, but you get the right answer.

Joshs (talk|edits) said:

8 January 2007
Dennis, I just tried entering it this way in my tax software, and on 1040 it put 20,000 in on L13 (capital gains) and $22,000 in on L14(other gains).

So, I have to pay capital gains tax on $20,000 and regular income tax on $22,000?

Joshs (talk|edits) said:

8 January 2007
It looks like I also need to put $22,000 in my Cost Basis. This then changes my 1040 to have no cg, and $20,000 regular income. Would that be correct then?

Thanks!

Deback (talk|edits) said:

January 8, 2007
On Form 4797, Part III, line 20, enter $20,000. On line 21, enter $22,000. On line 22, enter $22,000. Lines 24 and 25b will be $20,000. Line 25a will be $22,000. Lines 30 and 31 will be $20,000. On Form 4797, Part II, lines 13, 17, and 18b will be $20,000. Form 1040, line 14 will be $20,000. And that's it.

Joshs (talk|edits) said:

8 January 2007
Thanks!

Www.cpa1.biz (talk|edits) said:

8 January 2007
Josh any depreciation recapture for personal property is considered ordinary income and the difference gain of the sale will be capital gain income.

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