3. One of Jess’s clients is interested in building a shopping center on a tract

Question

3. One of Jess’s clients is interested in building a shopping center on a tract of land that Jess currently owns in Franklin County. Jess inherited a piece property in New Hampshire from her aunt when she died on March 9, 1989. Her aunt purchased the land in 1981 for $35,000. At the date of her death, the land was worth $60,000. It had since been rezoned for commercial use and had a value of $110,000. On November 11, 2014, Jess exchanged the New Hampshire parcel for a similar tract in Franklin County worth $110,000 in a nontaxable exchange.

4. On August 2, 2016, Jess sold the tract of land in Franklin County (from Item 3) to her client. Under the terms of the sale, Jess received cash of $115,000 for the sale of the land

How would you report this on form 8949?

Explanation / Answer

Carrying Book Value of an asset

It can be defined as the value for an asset as it appears in the books of accounts, which is cost of asset less total accumulated depreciation of the asset over its total life.

Sales

Sale of any goods or services can be made on cash or credit basis. The amount receivable on sale can either be received immediately in cash or such a payment can be received at some future date. In case of sale is being made on credit basis the company maintains an account of such customer in its books as Debtor or Accounts Receivable.

Purchases

Purchase of goods can either be made in cash or on credit from the suppliers. In case when the goods are purchased on Credit, the company is liable to make its payment at a future date. To record such a liability till the payment is made by the company to the creditor the company maintains an account known as Trade Payables or Accounts Payable

Depreciation Expense

Depreciation is a method in which monetary value of an asset’s decreases during the life of the assets due to wear and tear or obsolescence. The depreciation expense shall be calculated as mentioned below.

Residual value means remaining value after it has been fully depreciated. In other words the value at which the assets will be sold in the market.

Fixed Assets

These are those assets which are bought by the company for the long-term use in the business and are generally require large capital investments. Depreciation is charged on such assets except land over their useful life.

Land- It can be defined as the assets in the form of a plot of land which is used in the business for carrying out the business activities.

Building- Any construction or improvements on a plot of land by the company for usage as working place, warehouse etc.

Furniture- These are the assets which are purchased by the company for use of its employees or the clients when they visit their premises such as Chairs, Tables, Sofas etc.

Please clarify what needs to calculated as the question is comprising the initial part, it does not involve question.

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