36 - Property Transactions 1

Question 1

What is the basic calculation for basis in property?

Answer 1

Cost of property + Purchase expenses + Debt assumed + Back taxes and interest paid = Basis. Note: taxes and interest related to time when a taxpayer did not own the property are not deductible - they are added to basis.

Question 2

What is the recipient or donee’s basis on gifted property?

Answer 2

Sold at a gain: use donor’s basis

Sold at a loss: use lesser of donor’s basis or FMV at time of distribution

Sold in between donor’s basis and FMV: No gain or loss

Question 3

What is the basis and holding period of inherited property?

Answer 3

FMV at date of death or alternate valuation date (6 months later)

If alternate date is elected by property is sold before 6 month window; use FMV at date of death.

Property inherited is LTCG property regardless of how long it is held by the recipient.

Question 4

What is the holding period on a stock dividend?

Answer 4

Holding period of new stock received from a dividend takes on the holding period of the original stock

Question 5

What property is eligible for like-kind exchange treatment?

Answer 5

Real for real or personal for personal business property only

US property only

Question 6

What is BOOT in a like-kind exchange?

Answer 6

Cash received + unlike property received + liability passed to other party

Question 7

In a like-kind exchange; how is it handled if a netting of mortgages results in net boot paid?

Answer 7

DO NOT subtract the boot paid amount from the cash received

Ignore the boot paid amount from the mortgage completely

Question 8

What is an involuntary conversion? When does it not result in a gain?

Answer 8

Occurs when you receive money for a property involuntarily converted

There is no gain if you reinvest the proceeds completely

If proceeds not completely reinvested; gain is LESSER of realized gain or amount not reinvested.

Question 9

What are the requirements for exclusion of gain on a primary residence? How are losses treated?

Answer 9

Must live there 2 out of 5 years

Loss on sale of home is NOT deductible

Question 10

What is a wash sale?

Answer 10

30 Day rule applies

Disallowed loss adds to basis of new stock

New stock takes on date of acquisition of old stock