Dean and Ellen Price are married and have a manufacturing business.

They bought a piece of business equipment (7-year personal property) on 4/1/2018 for $50,000.Use half-year convention to calculate the MACRS depreciation deduction on the equipment for 2018 and 2019

They also has a pick-up truck used for business (5-year recovery period) acquired on 8/23/2018 for $25,000. On 11/15/2019, he sold the pick-up truck for $24,000. Use the half-year convention to calculate the MACRS depreciation on the truck for 2018 and 2019.

On 10/26/2019 Dean sold his old storage building used for his business for $220,000.They purchased the building in 2001 for $100,000. Total depreciation (accumulated depreciation) taken on the building is $20,000.

His 2019 Business income and expenditures (Schedule -C):

Sales$ 657,500

Cost of goods sold$ 315,000

Other business expenses (incl. deprecation taken on the storage building)$ 140,000

In 2019 Dean also sold various assets. The information about the selling price and depreciation of the property is listed below.

Placed in Service / Purchased on

Sold on

Initial Cost

2019 Depr. Amount

Accumulated

Depreciation. (Depr. Allowed)

Tax Basis= Initial Cost - Depr. Allowed

Office tables

4/4/2018

10/16/2019

For $2,900

$3,000

$375

$825

Office chairs

3/1/2015

11/8/2019

For $4,000

$8,000

$1,000

$2,200

Marketable securities

2/1/2019

12/1/2019

For $20,000

$12,000

$0

$0

Land held for investment

7/1/2018

11/29/2019

For $48,000

$45,000

$0

$0

In 2019 Dean sold his wine collection for $9,000, which is bought two years ago for $8,000.

They also has a short-term capital loss carryover of $10,000 from 2009.

Part I: MACRS Depreciations and Adjusted Basis

2018:

Date Acquired

(1)

Date Disposed

(2)

MACRS Rate

(3)

Initial Cost

(4)

2018 MACRS Depreciation Deduction

(5) = (3)*(4)

BusinessEquipment

N/A

Pick-up Truck

2019 Depreciation

Date Acquired

Date Disposed

MACRS Rate

Initial Cost

2019 MACRS Depreciation Deduction

BusinessEquipment

N/A

Pick-up Truck

(Sold during the year)

2019 Tax Basis

Date Acquired

(1)

Date Disposed

(2)

Initial Cost

(3)

Accumulated Depreciation

(4)

Tax Basis at year end

(5) = (3)-(4).

Business Equipment

N/A

Pick-up Truck

2019 Net Schedule-C Business income

_184, 880 ________________________________________

Part II. Summary Sheet for the Sales of Business Property (Form 4797)

Step 1) Sales or Exchanges of Property Used in a Trade or Business (Held for More Than 1 Year)

Description of property (1)

Date acquired (2)

Date Sold (3)

Gross Sales Price (4)

Accumulated

Depreciation (5)

Tax Basis (6)

Gain or (loss) (4-6)

A)

B)

C)

D)

Step 2) Ordinary Gains and Losses (incl. property held 1 year or less). Enter zero if not applicable.

Description of property

Date acquired

Date Sold

Gross Sales Price

Accumulated

Depreciation

Adj. Basis

Gain or (loss)

Step 3). Descriptions of Section 1245 property:

1) Description of property

2)

Date acquired

3)

Date Sold

4)

Gain

5)

Accumulated

Depreciation

6)

Amount of Gain reported as Ordinary

(Lesser of 4 or 5)

7) Remaining Gain =

(4) - (6)

3 (a) Net the gains/loss in A,B,C,D ____________

3 (b) Total Amount reported on (6) above: ______________________

3 (c) = 3(a) - 3(b) _________ (Remaining Section 1231 Gain)

(Part II. continued) Summary Sheet for the Sales of Business Property

Step 4. Description of Section 1250 property

1) Description of property

2)

Date acquired

3)

Date Sold

4)

Gain

5)

Depreciation allowed (Accumulated Depreciation)

6)

Unrecaptured 1250 Gain.

7) Remaining Gain =

(4) - (6)

4(a) = Remaining Section 1231 Gain from 3(c): ________

4(b): Total Unrecaptured 1250 Gain on 6) above ________

4(c) = 4(a) - 4(b) ________

Part III. Summary Sheet on the Sales of Capital Assets (Form 8949)

1). Short-term

Description of property

Date acquired

Date Sold

Gross Sales Price

Depreciation allowed

Cost Basis

Gain or (loss)

2) Long-term

Description of property

Date acquired

Date Sold

Gross Sales Price

Depreciation allowed

Cost Basis

Gain or (loss)

Summary for Capital Gains and Losses:

1.Net Short-term totals

2. Net Long-term totals

Part IV: Netting Process

Short-term Capital Gains and Loss Carry-overs

Long-term Capital Gain (LTCG)

Collectibles

Unrecaptured 1250 Gain

Net Sec. 1231 Gain

Other Long-term capital gain

Net the Short-term Capital Gain or Losses above =

_______

Amount from Part II, 4(b)

__________

Amount from Part II, 4(c)

________

Part III, Net LTCG, excluding Collectibles

_____

Use the above amount to net against Collectibles, Unrecaptured Sec. 1250 Gain, LTCG, etc. on the right

Net Capital Gain:

Part V. Self-Employment Tax Computation

2019 Net Schedule-C income (from page 2): ____________

2019 Self-Employment Tax: __________________

Social security tax = (The lesser of Net Sch-C income or $132,900)*12.4%, round up to nearest dollar: _____________

Medicare tax = (Net Schedule-C business income)*92.35%*2.9%, round up to nearest dollar: ________________

Total Self-Employment Tax = ___________

Part VI. Income Tax Computation

A. Net Capital Gains (NCG from page 6) ____________________

B. Other Gains (the amount for Part II 3(b) on page 3)

________

C. Taxpayer's AGI (Net Schedule-C income, NCG, Other Gains, less one-half of Self-employment tax)

AGI __________

D. Taxable Income before Qualified Business Income Deduction (AGI - 2019 Standard Deduction for Married Filing Jointly):

_______________

E. Qualified Business Income Deduction (see page 8): __________

F: Taxable income: ________ (F=D-E)

G. Tax Computation

1)Tax on Capital Gains =

15% x __________________

+25% x ___________________

+28% x __________________

2)Tax based on tax rate schedule Y-1 (AGI - NCG):____________

3)Total Self-Employment Tax from Part V _______

Add G(1), G(2) and G(3), this is their total tax____________

Q: How is the deduction for Qualified Business Income (QBI) computed?

A: The SSTB (Specified Trade or Business) limitation does not apply if a taxpayer's taxable income is below $321,400 for a married couple filing a joint return and $160,700 for all other taxpayers in 2019; the deduction is the lesser of:

A) 20 percent of the taxpayer's QBI (Net Schedule-C income), plus 20 percent of the taxpayer's qualified real estate investment trust (REIT) dividends and qualified publicly traded partnership (PTP) income

B) 20%*(excess of taxpayer's taxable income before QBI deduction over net capital gains)

If the taxpayer's taxable income is above the thresholds, the deduction may be limited based on whether the business is an SSTB, the W-2 wages paid by the business and the unadjusted basis of certain property used by the business.