Exempt Organizations Technical Guide›TG 57: Taxes on Net Investment Income – IRC Section 4940›Table of Contents
F.2. Examples
0824 Publ 5580 (PDF) · 2026-10-03 edition · updated 2026-10-04 · United States
(1) The regulations sets forth three examples of the sale or other disposition of
property referred to in Section 4940(c)(4)(A) which results in a capital loss as described in Treas. Reg. 53.4940-1(f)(3).
Example : A private foundation holds certain depreciable real property on December 31, 1969, having a basis of $102,000. The fair market value of such property on that date was $100,000. For its taxable year 1970 the foundation was allowed depreciation for such property of $5,100 on the straight-line method, the allowable amount computed on the $102,000 basis. The property was sold on January 1, 1971, for $100,000. Because fair market value on December 31, 1969, less straight line depreciation of $5,100 ($94,900) is less than basis as determined by Part II of Subchapter O of Chapter 1, $96,900 ($102,000 less $5,100), a gain of $3,100 is recognized (sales price of $100,000 less the greater of the two possible bases). Treas. Reg. 53.4940-1(f)(4) Example 1.
Example: Assume the same facts in the example above, except that the sale price was $95,000. Because the sale price was $1,900 less than the basis for loss ($96,900 as determined by the application of subparagraph (2)(ii) of this paragraph), there is a capital loss of $1,900 which may be deducted against capital gains for 1971 (if any) in determining capital gain net income (for taxable years beginning after December 31, 1976). Treas. Reg. 53.4940-1(f)(4) Example 2.
Example: A private foundation holds certain depreciable real property on December 31, 1969, having a basis of $102,000. The fair market value of such
20
property on that date was $110,000. For its taxable year 1970 the foundation was allowed depreciation for such property of $5,100 on the straight line method, the allowable amount computed on the $102,000 basis. The property was sold on January 1, 1971, for $100,000. Fair market value on December 31, 1969, less straight line depreciation of $5,100 ($104,900) exceeds basis as determined by Part II of Subchapter O of Chapter 1, $96,900 ($102,000 less $5,100), and will be used for purposes of determining gain. Because basis for purposes of determining gain exceeds sale price, there is no gain. There is no loss because basis for purposes of determining loss ($96,900) is less than sale price. See Treas. Reg. 53.4940-1(f)(4) Example 3.
21
Get a plain-English answer with a citation back to this text.
Ask AI about this code