Page 118 - Virtual Currencies

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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
previous years. The rest, if any, is • Whether the adjusted basis was figured d. Deduction for capital costs incurred in
long-term capital gain. using depreciation or amortization another complying with Environmental Protec-
Nonrecaptured section 1231 losses. person claimed. tion Agency sulfur regulations.
Your nonrecaptured section 1231 losses are Corporate distributions. For information on e. Deduction for certain qualified refinery
your net section 1231 losses for the previous 5 property distributed by corporations, see Distri- property if in effect before the repeal
years that have not been applied against a net butions to Shareholders in Pub. 542, Corpora- by the Tax Increase Prevention Act of
section 1231 gain. Therefore, if in any of your 5 tions. 2014. (Repealed by P.L. 113-295,
preceding tax years you had section 1231 los- section 221(a)(34)(A), except with re-
ses, a net gain for the current year from the sale General asset accounts. Different rules apply gards to deductions made prior to De-
of section 1231 assets is ordinary gain to the to dispositions of property you depreciated us- cember 19, 2014.)
extent of your prior losses. These losses are ing a general asset account. For information on f. Any applicable deduction for qualified
applied against your net section 1231 gain be- these rules, see Pub. 946. energy efficient commercial building
ginning with the earliest loss in the 5-year pe- property. See section 179D of the In-
riod. Special rules for certain qualified section ternal Revenue Code.
179 real property. If you sold or otherwise
Example. In 2022, You have a $2,000 net disposed of qualified real property for which you g. Amortization of railroad grading and
section 1231 gain. To figure how much you elected under section 179 of the Internal Reve- tunnel bores, if in effect before the re-
have to report as ordinary income and nue Code to treat the cost of such property as peal by the Revenue Reconciliation
long-term capital gain, you must first determine an expense, special rules apply. This includes Act of 1990. (Repealed by Public Law
your section 1231 gains and losses from the special rules for determining gain or loss and 99-514, Tax Reform Act of 1986, sec-
previous 5-year period. From 2017 through determining if the basis of the property is trea- tion 242(a).)
2021, you had the following section 1231 gains ted as section 1245 or section 1250 property. h. Certain expenditures for childcare fa-
and losses. cilities if in effect before repeal by the
Section 1245 Property Omnibus Budget Reconciliation Act of
Year Amount 1990, Public Law 101-508, section
2017 -0- 11801(a)(13) (except with regards to
2018 -0- A gain on the disposition of section 1245 prop- deductions made prior to November
2019 ($2,500) erty is treated as ordinary income to the extent 5, 1990).
2020 -0- of depreciation allowed or allowable on the
2021 $1,800 property. See Gain Treated as Ordinary In- i. Expenditures to remove architectural
You use this information to figure how to re- come, later. and transportation barriers to the
handicapped and elderly.
port your section 1231 gain for 2022 as shown Any gain recognized that is more than the
below. part that is ordinary income from depreciation is j. Deduction for qualified tertiary injec-
a section 1231 gain. See Treatment as ordinary tant expenses.
1) Net section 1231 gain (2022) . . . . . $2,000 or capital under Section 1231 Gains and Los- k. Certain reforestation expenditures.
2) Net section 1231 loss ses, earlier. l. Deduction for election to expense
(2019) . . . . . . . . . . . . . . . . ($2,500) qualified advanced mine safety equip-
3) Net section 1231 gain Section 1245 property defined. Section ment property.
(2021) . . . . . . . . . . . . . . . . 1,800 1245 property includes any property that is or
4) Remaining net section has been subject to an allowance for deprecia- m. Any deduction for qualified film, televi-
1231 loss from tion or amortization and that is any of the follow- sion, or live theatrical productions al-
prior 5 years . . . . . . . . . . . ($700) ing types of property. lowed under section 181 of the Inter-
5) Gain treated as 1. Personal property (either tangible or intan- nal Revenue Code.
ordinary income . . . . . . . . . . . . . . . . $700 gible). 4. Single purpose agricultural (livestock) or
6) Gain treated as long-term horticultural structures.
capital gain . . . . . . . . . . . . . . $1,300 2. Other tangible property (except buildings
and their structural components, dis- 5. Storage facilities (except buildings and
cussed later) used as any of the following. their structural components) used in dis-
Depreciation Recapture a. An integral part of manufacturing, pro- tributing petroleum or any primary product
of petroleum.
duction, or extraction, or of furnishing
If you dispose of depreciable or amortizable transportation, communications, elec- 6. Any railroad grading or tunnel bore.
property at a gain, you may have to treat all or tricity, gas, water, or sewage disposal Buildings and structural components.
part of the gain (even if otherwise nontaxable) services. Section 1245 property does not include build-
as ordinary income. b. A research facility in any of the activi- ings and structural components. The term
To figure any gain that must be repor- ties in (a). “building” includes a house, barn, warehouse,
ted as ordinary income, you must keep c. A facility in any of the activities in (a) or garage. The term “structural component” in-
permanent records of the facts neces- cludes walls, floors, windows, doors, central air
RECORDS for the bulk storage of fungible com-
sary to figure the depreciation or amortization modities (discussed later). conditioning systems, light fixtures, etc.
allowed or allowable on your property. This in- Do not treat a structure that is essentially
cludes the date and manner of acquisition, cost 3. Where applicable, that part of real prop- machinery or equipment as a building or struc-
or other basis, depreciation or amortization, and erty (not included in (2)) with an adjusted tural component. Also, do not treat a structure
all other adjustments that affect basis. basis reduced by (but not limited to) the that houses property used as an integral part of
following. an activity as a building or structural component
On property you acquired in a nontaxable ex- a. Amortization of certified pollution con- if the structure's use is so closely related to the
change or as a gift, your records must also indi- trol facilities. property's use that the structure can be expec-
cate the following information. ted to be replaced when the property it initially
b. The section 179 expense deduction. houses is replaced.
• Whether the adjusted basis was figured The fact that the structure is specially de-
using depreciation or amortization you c. Deduction for qualified clean-fuel ve- signed to withstand the stress and other de-
claimed on other property. hicles and certain refueling property mands of the property and cannot be used eco-
(as in effect before repeal by Public nomically for other purposes indicates it is
Law 113-295). closely related to the use of the property it

Chapter 3 Ordinary or Capital Gain or Loss for Business Property Page 27