Question

An individual taxpayer sells a business building placed in service five years ago and recognizes a gain. This is the​ taxpayer's first and only sale of Sec. 1231 property. Since the gain will be treated as​ LTCG, the details of the sale should be reported on Schedule D of Form 1040. True or False?

Answer 1

As per the federal taxation law the Schedule D of form 1040 states the following:

1. The gain or loss arises from sale or exchange of capital assets should be reported in this schedule.

2. Gains which are arises from conversion of capital assets which is nor used for busienss. The nature of coversion should be involuntary.

3. The distribution of capital gain is not directly reported in this schedule.

The FORM 1040 is for the individual return and schedule D is a part of this return form. In the schedule D above mentioned things are considered. In the instant case the capital is arises due to transfer of building which is used for the business of the individual. The building is held for 5 years and the gain arises form thsi is LONG TERM CAPITAL GAIN (LTCG). But the same should not be reported in the schedule D of FORM 1040 as it is clearly mention in the provision that any gain arises from transfer of assets which are used in the business should not be reported in the schedule D.

Hence the statement i.e. the details of the sale should be reported on Schedule D of FORM 1040 is False.