Chapter 12 Flashcards
This involve the sale, exchanges, and other disposition of properties,
Dealings in properties
Dealings in ordinary assets are subject to?
RIT
Dealings in capital assets, which are not domestic stocks and real properties, are subject to?
RIT
How to compute for gain or loss?
Selling Price
Less: Tax Basis
Are ordinary gains taxable?
Yes in full
Are ordinary losses deductible?
Yes in full
ROPA by banks are treated as?
Ordinary assets
Can you deduct capital losses from capital gains?
Yes they are offset
Can you deduct ordinary losses from capital gains?
No
For individual taxpayers, how much of the capital gain or loss is recognized if the holding period is short term?
100%
For individual taxpayers, how much of the capital gain or loss is recognized if the holding period is long term?
50%
For corporate taxpayers, how much of the capital gain or loss is recognized if the holding period is long term?
100% regardless of holding period
For corporate taxpayers, how much of the capital gain or loss is recognized if the holding period is short term?
100% regardless of holding period
Are annual capital gains build up taxable?
No they are unrealized
Annual capital gains build up are only taxable when realized through sale or exchange. This is based on what theory?
Ability to pay theory
If the taxpayer is an RC or DC, what is the situs of dealings in properties?
Apply to all of their properties regardless of location because they are taxable on their global income
What is NCLCO?
Net Capital Loss Carry Over
Who are allowed to use NCLCO?
Individual taxpayers for one year only
What are the 3 limits in NCLCO?
- The actual net income before dealing in properties in the year the loss was incurred
- The available net capital gain in the following year
- The actual net capital loss incurred
The lowest among the 3 is the amount to be used in carrying over.
This rule states that the amount of capital loss carry-over shall not exceed the net income before dealings in capital assets in the year the net capital loss was sustained.
Tax benefit rule
The amount of capital loss carry over should not exceed?
The net capital gain of the following year
For assets acquired by purchase, what is the tax basis?
Acquisition cost for capital assets and non-depreciable assets and any asset purchased for an inadequate consideration
Depreciated cost for depreciable ordinary assets
What is the tax basis of a donation?
tax basis of donor
fmv at the date of gift
whichever is lower
What is the tax basis of an inheritance?
fv of property on the date of death
What is the tax basis of a pure share-for-share swap?
tax basis of shares exchanged
What is the tax basis of a a share swap with non cash consideration?
tax basis of shares
add: gain recognized
add: amounts treated as dividends
less: cash and fv of other properties received
tax basis of new shares
Is there gain or loss recognized for the property-for-stock transaction pursuant to a plan of merger or consolidation?
None
