Whether your small business focuses on real estate or sold unneeded property during the tax year, a copy of form 1099-S, which is sent to both you and the IRS by the closing attorney or real estate official, reports the gross proceeds from the sale. When you file your tax return, you must calculate your basis in the property and compare it to the proceeds reported to determine if a capital gain exists. If there is no gain, you avoid paying capital gains tax but still need to submit forms to illustrate your capital loss or break-even sale.
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1.
Compare the gross proceeds reported on your copy of form 1099-S to verify the total matches the selling price listed on closing documents. If there is an error, contact the submitting attorney or real estate professional and request a corrected copy.
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2.
Determine the basis for the property by reviewing records showing the price your business paid for the real estate.
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3.
Increase your basis to reflect the costs of any improvements with an expected useful life greater than one year that added value to the property or increased its lifespan. Also add the assessment for any property improvements initiated by your municipality, such as an improved sidewalk, to your basis.
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Decrease your basis to reflect depreciation expense deductions taken by your business, insurance reimbursem*nts received or funds received from the government in the form of tax credits or subsidies.
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Complete IRS form 8949, "Sale and Other Dispositions of Capital Assets." You must describe your property and list the dates it was purchased and sold. Report the basis and any adjustments. Use form 8949 for both short-term and long-term assets.
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6.
Transfer the requested information from form 8949 to Schedule D, "Capital Gains and Losses." This form compiles both short- and long-term gains and losses and allows you to reduce the present year's capital gains by a capital loss carryover when applicable. Schedule D reports your total capital gain or loss to the IRS.
