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.Lloyd will attach the following schedule (Figure 11.2) tohis return showing the computation.If Lloyd acquires a new residence with a home office, he must file an addi-tional Form 8829 to claim home-office deductions for the new home office.Both Forms 8829 should be filed with his return, with the total allowable homeoffice deductions accounted for on line 30 of Schedule C.Because Lloyd s home office qualifies for the Section 121 exclusion (ownedand occupied as a residence for two of five years preceding the sale), the ex-cluded portion is recorded as a loss on line 2 of Form 4797, column (g) (Figure11.3).The loss shown as Section 121 Exclusion on line 2 of Form 4797 is simplythe total gain attributable to the home office minus the depreciation gain REPORTING POST-TAXPAYER RELIEF ACT OF 1997 SALES243OMB No.1545-1266Expenses for Business Use of Your HomeForm 8829File only with Schedule C (Form 1040).Use a separate Form 8829 for each205home you used for business during the year.Department of the Treasury AttachmentInternal Revenue Service (99) See separate instructions.Sequence No.66Name(s) of proprietor(s) Your social security numberLloyd Brown999 33 4444Part I Part of Your Home Used for Business1 Area used regularly and exclusively for business, regularly for day care, or for storage of inventory2001or product samples (see instructions)2,00022 Total area of home3 10 %3 Divide line 1 by line 2.Enter the result as a percentageFor day-care facilities not used exclusively for business, also complete lines 4 6.All others, skip lines 4 6 and enter the amount from line 3 on line 7.4 hr.4 Multiply days used for day care during year by hours used per day5 8,760 hr.5 Total hours available for use during the year (365 days 24 hours) (see instructions)6.6 Divide line 4 by line 5.Enter the result as a decimal amount7 Business percentage.For day-care facilities not used exclusively for business, multiply line 6 byline 3 (enter the result as a percentage).All others, enter the amount from line 3 107 %Part II Figure Your Allowable Deduction8 Enter the amount from Schedule C, line 29, plus any net gain or (loss) derived from the business use of16,455your home and shown on Schedule D or Form 4797.If more than one place of business, see instructions 8See instructions for columns (a) and (b) before(a) Direct expenses (b) Indirect expensescompleting lines 9 20.99 Casualty losses (see instructions)8,5001010 Deductible mortgage interest (see instructions)1,8001111 Real estate taxes (see instructions)10,3001212 Add lines 9, 10, and 111,0301313 Multiply line 12, column (b) by line 71,0301414 Add line 12, column (a) and line 1315 15,42515 Subtract line 14 from line 8.If zero or less, enter -0-1616 Excess mortgage interest (see instructions)17 40017 Insurance501818 Repairs and maintenance19 1,25019 Utilities2020 Other expenses (see instructions)1,7002121 Add lines 16 through 201702222 Multiply line 21, column (b) by line 72323 Carryover of operating expenses from 2001 Form 8829, line 411702424 Add line 21 in column (a), line 22, and line 231702525 Allowable operating expenses.Enter the smaller of line 15 or line 2426 15,25526 Limit on excess casualty losses and depreciation.Subtract line 25 from line 152727 Excess casualty losses (see instructions)28 20928 Depreciation of your home from Part III below2929 Carryover of excess casualty losses and depreciation from 2001 Form 8829, line 4230 20930 Add lines 27 through 292093131 Allowable excess casualty losses and depreciation.Enter the smaller of line 26 or line 3032 1,40932 Add lines 14, 25, and 313333 Casualty loss portion, if any, from lines 14 and 31.Carry amount to Form 4684, Section B34 Allowable expenses for business use of your home.Subtract line 33 from line 32.Enter here1,409and on Schedule C, line 30.If your home was used for more than one business, see instructions 34Part III Depreciation of Your Home165,0003535 Enter the smaller of your home s adjusted basis or its fair market value (see instructions)15,0003636 Value of land included on line 3537 150,00037 Basis of building.Subtract line 36 from line 3538 15,00038 Business basis of building.Multiply line 37 by line 739 1.391 %39 Depreciation percentage (see instructions)40 Depreciation allowable (see instructions).Multiply line 38 by line 39.Enter here and on line 28 above 40 209Part IV Carryover of Unallowed Expenses to 20064141 Operating expenses.Subtract line 25 from line 24.If less than zero, enter -0-42 Excess casualty losses and depreciation.Subtract line 31 from line 30.If less than zero, enter -0- 42For Paperwork Reduction Act Notice, see page 4 of separate instructions.Cat.No.13232M Form 8829 (2005)FIGURE 11.1 SALE OF YOUR RESIDENCE244Portion of Schedule C tentative income attributable to business use of homebased on days occupied:190/365 × $30,500 $015,877Depreciation gain:Depreciation claimed on home office for 2001(see Table 8.1): 15,000 × 2.461% $000,369Depreciation claimedon home office for 2005 (see Form 8829): $000,209Total depreciation gain: Form 4797, Line 7 $000,578Total net business income: Form 8829, Line 8 $016,455Form 4797 Allocation of Business-Use Portion of Residence1.Selling price of home $240,0002.Business-use percentage (Form 8829, Line 7) 10%3.Line 1 × Line 2: put on Form 4797, Line 2(d) $024,0004.Expenses of sale $019,2005.Line 2 × Line 4 $001,9206.Business basis of residence (Form 8829, Line 38) $015,0007.Line 5 + Line 6: put on Form 4797, Line 2(f) $016,9208.Total depreciation claimed on business basis:put on Form 4797, Line 2(e) $000,578FIGURE 11.2 Schedule for Form 8829, Line 8 and Form 4797, Line 7($7,658 - $578 = $7,080).The depreciation gain shown on Form 4797, line 7, iscombined with other business gains and losses Lloyd might have.If there are nooffsetting losses on Form 4797, it is transferred to Schedule D, line 11 as long-term capital gain.In computing Lloyd s tax in Part IV of Schedule D, this gain isreferred to as unrecaptured section 1250 gain, and is taxed at a maximum rateof 25 percent.Turning to Example 11.2, since Tess has owned and occupied her residence formore than two of the five years preceding the sale, gain on the sale of the resi-dence portion, which is less than $250,000, is excluded under Section 121.Thereis no reporting requirement beyond the home-office portion. REPORTING POST-TAXPAYER RELIEF ACT OF 1997 SALES245OMB No.1545-0184Sales of Business PropertyForm 4797(Also Involuntary Conversions and Recapture Amounts205Under Sections 179 and 280F(b)(2))Department of the Treasury AttachmentInternal Revenue Service (99) Attach to your tax return.See separate instructions.Sequence No
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