Capital Gains_Losses and 1231 Property Flashcards
What is the percentage of qualified small business exclusion of stock gain?
50% (increased to higher levels for certain temporary periods).
List the characteristics of ordinary loss deduction on sale of worthless small business stock.
- Corporation issued stock for less than $1 million;
- Corporation must conduct an active business;
- Taxpayer received stock from corporation in initial offering.
Define “long-term assets.”
Assets held over one year.
Describe the elements of the net capital loss deduction for individuals.
- Deductible up to $3,000 per year;
- For AGI;
- Also limited to taxable income;
- Excess loss carries forward; no limit on carryforward period.
What is the maximum tax rate for capital gains from the sale of collectibles?
The maximum rate is 28%.
How can corporations use their capital loss deduction?
- Can only use capital losses to offset capital gain net income; no deduction for net capital losses;
- Unused losses are carried back three years and forward five years.
What is the net capital loss limit for individuals?
The loss limit is $3,000.
List the qualified small business stock exclusion of gain requirements.
- Stock held for more than five years after initial issuance;
- Stock from active corporation with assets less than $50 million.
What is the ordinary loss deduction limit on the sale of a worthless small business stock?
$50,000 ($100,000 if married filing joint).
What depreciation is subject to recapture under Section 1250?
Excess depreciation (depreciation claimed over straight-line).
Define “Section 1245 property.”
All property other than land and building.
What depreciation is subject to recapture under Section 1245?
All depreciation claimed.
What is the maximum tax rate for gain attributable to depreciation claimed on real estate?
25% for straight line depreciation recapture.
What is the period of time that lookback rules apply to Section 1231 gains?
5 years.
What is the class life for realty?
39 years (27 1/2 years for “residential”).
Describe the business use test for listed property.
- Business use must exceed 50% of total use;
- Business use is limited to use in the trade or for the convenience of the employer;
- Failure to meet business use means cost recovery limited to straight line;
- But note that business and investment use can be depreciated.
Define “listed property.”
Assets, such as computers and vehicles (but not cell phones), that are commonly used for business and personal purposes.
What is the general convention for personalty under the Modified Accelerated Cost Recovery System (MACRS)?
The general convention is mid-year.
Under what circumstances can a convention other than the mid-year convention be used for all personalty?
A mid-quarter convention is used for all personalty if more than 40% of personalty is purchased in last quarter of the year.
List the alternatives to the Modified Accelerated Cost Recovery System (MACRS).
- Straight line for personalty;
- AMT system - 150% declining balance;
- Alternative depreciation system-straight line over extended life;
- Units of production.
What is the depreciation method for personalty under the Modified Accelerated Cost Recovery System (MACRS)?
The depreciation method is double declining balance.
What is the depreciation method for realty under the Modified Accelerated Cost Recovery System (MACRS)?
The depreciation method is straight line.
What criteria should be considered in making a determination to expense an asset for income tax purposes?
- Tangible Personalty;
- Lesser of business income or $500,000 in 2012;
- Phased out dollar for dollar if tangible personalty asset purchases exceed $2,000,000 in 2012.
