gain / loss on sale of assets vs. capital gain - long term ??


R

richbonilla

a corp that has been in business for 30 years sells off one
of its showrooms in another state, including inventory,
buildings and land. they booked the huge gain (from the land
and building sale) to the income statement account "gain /
loss on sale of assets", creating a big, taxable "corp
income" at the bottom line. could they char the sale instead
as "capital gain" (long term) at a much lower tax rate vs.
regular corp income?

what about the machinery and equipment, of course most of it
was fully depreciated, thus causing another large "gain on
sale of assets"..??

thanx !!
 
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J

James Lewis

a corp that has been in business for 30 years sells off one
of its showrooms in another state, including inventory,
buildings and land. they booked the huge gain (from the land
and building sale) to the income statement account "gain /
loss on sale of assets", creating a big, taxable "corp
income" at the bottom line. could they char the sale instead
as "capital gain" (long term) at a much lower tax rate vs.
regular corp income?

what about the machinery and equipment, of course most of it
was fully depreciated, thus causing another large "gain on
sale of assets"..??
If you are a C corp, there's no difference in tax...ie
capital gains are taxed the same and get no favorable
treatment. That's why it is unwise to buy appreciable assets
in a C corp. If you are an S corp, the sale should be
treated as sale of assets, part of which is a section 1231
(capital gain), part 1245 (depreciable assets other than
buildings/real estate) and part 1250 (real estate). The gain
on the 1245 income is ordinary up to depreciation taken. The
section 1250 could be partly at a higher rate depending on
your depreciation method and life used.

Mike Lewis, CPA
 
Last edited by a moderator:

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