Question

"Tax Strategies for Business-Owned Properties" Don, the owner of Watt Inc., has a building that he bought for $2,500,000. It has depreciated by $350,000. Now Don wants to sell it for $4,000,000. He has heard about ordinary losses. He has heard about capital losses. Unfortunately, Don does not know the difference between these two types of losses. To add to the confusion, he doesn’t know what the difference is between a realized and a recognized loss. How would you explain these concepts to Don? What type of advice would you offer to him and did any changes brought about by the Tax Cuts and Jobs Act impact your advice?

Answer 1

1.capital losses and ordinary losses receive different tax treatment

capital loss results when you sell a capital asset , such as stock and bonds for less than your cost

ordinary loss occurs from the normal operation of a business when expenses exceed income

2.a loss is realised immediately after you sell an asset for a loss

loss is recognised when loss may be applied against your taxes.most sales create a realised recognized loss at the same time,immediately after the sale . the IRS delays the tax impact of certain transactions.

here $1500000 is capital gain

and this all is included in IFRS 16 and IFRS 9