Connect With Us
When you sell, scrap, or otherwise remove a capital asset from your business, you'll have to report the change to the IRS and pay tax on any gain from the sale.
The good news is that the gain may well be a long-term capital gain, and long-term capital gains are taxed at a lower rate than other income. If you have a loss on property used in a trade or business, you can deduct it.
When you dispose of a capital asset, your gain (or loss) is computed by subtracting your adjusted tax basis for the property from your amount realized on the sale.
Your proceeds from the sale include the cash you receive in the sale, the fair market value of any property or services you receive, and the value of any of your existing mortgage, loans, and other debts that are assumed by the buyer. From these proceeds you may subtract any costs you had in carrying out the sale such as brokers' commissions, advertising expenses, appraisal fees, legal fees, surveys, abstract and recording fees, title insurance, and transfer or stamp taxes.
Your adjusted tax basis is generally your original cost for the property, plus the cost of any improvements or additions, and minus any depreciation or casualty losses you've deducted.
Here's what you need to know about capital gains: