ACC250 Chapter 10 Flashcards
The taxpayer’s acquisition basis plus capital improvements less amortization or depreciation.
ADJUSTED BASIS
The value of everything received by the seller in a transaction (cash, FMV of other property and relief of liabilities) less selling costs.
AMOUNT REALIZED
Property given or received in an otherwise nontaxable transaction such as a like-kind exchange that may trigger gain to a party to the transaction.
BOOT
In general, an asset other than an asset used in a trade or business or an asset such as an account or note receivable acquired in a business from the sale of services or property.
CAPITAL ASSET
A like-kind exchange where the taxpayer transfers like-kind property before receiving the like-kind property in exchange. The property to be received must be identified within 45 days and received within 180 days of the transfer of the property given up.
DEFERRED LIKE-KIND EXCHANGE
The conversion of Section 1231 gain into ordinary income on a sale (or exchange) based on the amount of accumulated depreciation on the property at the time of sale or exchange.
DEPRECIATION RECAPTURE
When a taxpayer receives noncash property as a replacement for property damaged or destroyed in an involuntary conversion rather than a cash payment.
DIRECT CONVERSION
The basis of an asset received in a nontaxable exchange. This is generally the basis of the asset given up in a nontaxable exchange. This may also be referred to as substituted basis.
EXCHANGED BASIS
The receipt of money or other property as a replacement for property that was destroyed or damaged in an involuntary conversion.
INDIRECT CONVERSION
A sale for which the taxpayer receives payment in more than one period.
INSTALLMENT SALE
A direct or indirect conversion of property through natural disaster, government condemnation, or accident that allows a taxpayer to defer realized gain if certain requirements are met.
INVOLUNTARY CONVERSION
A nontaxable (or partially taxable) trade or exchange of assets that are similar or related in use.
LIKE-KIND EXCHANGE
A net Section 1231 loss that is deducted as an ordinary loss in one year and has not caused subsequent Section 1231 gain to be taxed as ordinary income.
NONRECAPTURED NET SECTION 1231 LOSSES
A transaction where at least a portion of the realized gain or loss is not currently recognized.
NONRECOGNITION TRANSACTION
An asset created or used in a taxpayer’s trade or business (e.g. accounts receivable or inventory) that generates ordinary income (or loss) on disposition.
ORDINARY ASSET
A for-profit activity that doesn’t rise to the level of a trade or business.
PRODUCTION OF INCOME
Property acquired to replace property damaged or destroyed in an involuntary conversion. It must be of a similar or related use to the original property even if the replacement property is real property (rental real estate for rental real estate).
QUALIFIED REPLACEMENT PROPERTY
The difference between the amount realized and the adjusted basis of an asset sold or otherwise disposed of.
REALIZED GAIN OR LOSS
The recharacterization of income from capital gain to ordinary income.
RECAPTURE
The gain or loss included in gross income on a taxpayer’s tax return. This is usually the realized gain or loss unless a nonrecognition provision applies.
RECOGNIZED GAIN OR LOSS
The portion of a corporate taxpayer’s gain on real property that is converted from Section 1231 gain to ordinary income.
SECTION 291 DEPRECIATION RECAPTURE
Depreciable or real property used in a taxpayer’s trade or business owned for more than one year.
SECTION 1231 ASSETS
Tangible personal property and intangible property subject to cost recovery deductions.
SECTION 1245 PROPERTY
Real property subject to cost recovery deductions.
SECTION 1250 PROPERTY
People or organizations that facilitate the transfer of property between taxpayers in a like-kind exchange. Typically, they receive the cash from selling the property received from the taxpayer and use it to acquire like-kind property identified by the taxpayer.
THIRD-PARTY INTERMEDIARIES
A gain from the sale of real estate held by a noncorporate taxpayer for more than one year in a trade or business or as rental property attributable to tax depreciation deducted at ordinary tax rates. This gain is taxable at a maximum 25% capital gains rate.
UNRECAPTURED SECTION 1250 GAIN
