Publication 334 |
2001 Tax Year |
What Is a Disposition of Property?
A disposition of property includes the following transactions.
- You sell property for cash or other property.
- You exchange property for other property.
- You receive money as a tenant for the cancellation of a
lease.
- You receive money for granting the exclusive use of a
copyright throughout its life in a particular medium.
- You transfer property to satisfy a debt.
- You abandon property.
- Your bank or other financial institution forecloses on your
mortgage or repossesses your property.
- Your property is damaged, destroyed, or stolen, and you
receive property or money in payment.
- Your property is condemned, or disposed of under the threat
of condemnation, and you receive property or money in payment.
For details about damaged, destroyed, or stolen property, see
Publication 547,
Casualties, Disasters, and Thefts. For
details about other dispositions, see chapter 1 in Publication 544.
Nontaxable exchanges.
Certain exchanges of property are not taxable. This means any gain
from the exchange is not recognized and you cannot deduct any loss.
Your gain or loss will not be recognized until you sell or otherwise
dispose of the property you receive.
Like-kind exchanges.
A like-kind exchange is the exchange of property for the same kind
of property. It is the most common type of nontaxable exchange. To be
a like-kind exchange, the property traded and the property received
must be both of the following.
- Business or investment property.
- Like property.
Report the exchange of like-kind property on Form 8824,
Like-Kind Exchanges. For more information about
like-kind exchanges, see chapter 1 in Publication 544
Installment sales.
An installment sale is a sale of property where you receive at
least one payment after the tax year of the sale. If you finance the
buyer's purchase of your property, instead of having the buyer get a
loan or mortgage from a third party, you probably have an installment
sale.
For more information about installment sales, see Publication 537,
Installment Sales.
Sale of a business.
The sale of a business is not usually a sale of one asset. Instead,
all the assets of the business are sold. Generally, when this occurs,
each asset is treated as being sold separately for determining the
treatment of gain or loss.
Both the buyer and seller involved in the sale of a business must
report to the IRS the allocation of the sales price among the business
assets. Use Form 8594, Asset Acquisition Statement
Under Sections 338 and 1060, to provide this information. The
buyer and seller should each attach Form 8594 to their federal income
tax return for the year in which the sale occurred.
For more information about the sale of a business, see chapter 2 of
Publication 544.
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