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CCH Axcess Tax
Schedule D and Form 4797 Questions
Q. Is the automatic sale feature valid for sales or exchanges of multiple assets?
A. Yes, if all the following are true:
- Assets have the same holding period classification and property types, such as Section 1245 or Section 1231.
- Prior year depreciation in strict accordance with current year method, i.e. "code to force depreciation" not used.
- State differences do not exist and overriding amounts have not been entered.
Q. Where should Form 2439 long term capital gains be entered?
A. Undistributed long term capital gains reported on Form 2439 should be entered on the Income/Deductions - Gains and Losses worksheet, Form 2439 Capital Gains section, "Total amount" field. These will be included on Schedule D, line 11.
Q. Where should passive capital gains or losses be entered?
A. Passive capital gains or losses should be entered on the Income/Deductions - Gains and Losses worksheet, Business Property, Casualties and Thefts section if subject to Form 4797 recapture provisions or on the Income/Deductions - Gains and Losses worksheet, Stocks, Securities and Other Non-Passive Transactions section if not subject to Form 4797 recapture provisions.
Passive capital gains or losses from passthrough entities can be designated as passive on the Income/Deductions - Applicable Passthrough worksheet, Activity section.
Q. How do I get all or part of my net long term capital gains and qualified dividends included in investment income for purposes of my investment interest expense deduction?
A. Check the "Tax net long-term capital gains and qualified dividends at the marginal tax rate" field in the Other section of the Income/Deductions - Gains and Losses worksheet to include enough long term capital gains in investment income to prevent investment interest expense from being disallowed on the federal Form 4952. If the marginal tax rate is greater than the maximum capital gains rate, the portion of net long term capital gains included in investment income will be taxed at the higher marginal tax rate. The remaining amount will be taxed at the maximum capital gains rate.
Q. How do I designate a transaction as either an expired option, as inherited property, as a personal loss, as worthless stock, as a wash sale, as a section 1045 rollover, as a section 1397B rollover, a DC zone asset exclusion or a Qualified Community asset exclusion?
A. Enter the applicable code in the "Code" field in the Stocks, Securities and Other Non-Passive Transactions section of the Income/Deductions - Gains and Losses worksheet.
Q. How is capital gain calculated on a bargain sale entered on the Income/Deductions - Itemized Deductions worksheet, Noncash Charitable Contributions Greater than $5000 section?
A. If there is a bargain sale on a contribution, the calculation of the capital gain is done automatically if entries are made on the Income/Deductions - Itemized Deductions worksheet, Noncash Charitable Contributions Greater than $5000 section, "Donor's cost or adjusted basis" field, "Appraised fair market value" field, "Bargain sales code" field, and "Bargain sales amount received" field with a code of "2", "3" or "4" in the "Bargain sales code" field. The calculation is: Amount realized on the sale ("Bargain sales amount received")/FMV of property ("Appraised fair market value"). Multiply that result by the adjusted basis of the property sold ("Donor's cost or adjusted basis"). This result determines the new adjusted basis of the property sold. Then take the amount realized on the sale and subtract from it the new adjusted basis of the property sold. The difference is the capital gain on the bargain sale.
Q. How do I report a sale of a main home if used partly for business? Do I treat the sale differently if used for business in year of sale as compared to used for business in prior years only?
A. If the home was used partly for business in 2010, the gross proceeds, cost and expenses must all be manually split between the business and personal portion. The business portion should be entered on the Income/Deductions - Gains and Losses worksheet, Business Property, Casualties and Thefts section and the personal portion on the Income/Deductions - Gains and Losses worksheet, Sale of Your Home section. The exclusion amount may also be allocated between the business and personal portion. The personal portion of the exclusion should be entered on on the Income/Deductions - Gains and Losses worksheet, Sale of Your Home section, "Amount of allocated exclusion if prorated with Form 4797" field. The business portion on the Income/Deductions - Gains and Losses worksheet, Business Property, Casualties and Thefts section as a negative amount in the "Gross sales price" field, with a description of "Section 121 Exclusion." The only item that CANNOT be allocated is the depreciation after May 6, 1997. This amount should go on the Income/Deductions - Gains and Losses worksheet, Business Property, Casualties and Thefts section only. If the home was not used for business in 2010, but had been in prior years, the entire gain may be reported on the Income/Deductions - Gains and Losses worksheet, Sale of Your Home section. No allocation is needed. Depreciation before May 6, 1997 should go as a negative amount in the Commissions and Other Expenses... subsection, "Amount" field with a code of 2 in the "Code" field. Depreciation after May 6, 1997 should go in the "Depreciation claimed on property after May 6, 1997" field.