Chapter 4 Flashcards
What basis do you use when you sale a gift property?
Lower of the Rollover cost or FMV at date of gift
What holding period do you use when you sale a gift property?
If you used the rollover cost, you use the donors holding period, if you used the FMV at the date of gift, then the holding period starts at the date of gift
What basis do you use when you get inherited property basis? And when do you evaluate it?
FMV
valued at the earlier of distribution date of asser OR alternate valuation date (earlier of 6 months after death or date of distribution)
What holding period do you use when you sale an inherited property?
automatically consider it LT
What is the Homeowners Exclusion?
- definition
- amount
- age
- time limit
- exception
The sale of the taxpayers personal principal residence is subject to an exclusion from gross income for gain up to 500,000 MFJ or 250,000 everyone else. No age requirement. May not be used more than once every 2 years. Must live there at least 2 years within a 5 yr period. The exception is if they had to move out because of unforeseen circumstances. They can still take the deduction
What is Involuntary Conversion?
- definition
- time limit
Proceeds you received from something involuntary like a fire and u received proceeds is not taxable up to the extent u reinvest it in the same thing. It must happen 2 years from year end if its personal property and 3 years from year end if its business property
What is Like-kind exchange?
- definition
- exception
Like kind exchange is when you exchange business trade in or swapping real estate no gain is recognized unless boot is received and its not a like-kind item.
What the equation for earned revenue in an installment sale?
Cash collection x Gross profit percentage
What is the Wash Sale Rule?
when a security is sold for a loss and repurchased within 30 days before or after the sale date. The loss is disallowed
How do you treat a loss within entities that are more than 50 percent owned by the same people/company?
- definition
- basis
- holding period
Losses are disallowed. The base that that person uses that just purchased it, is the original owners basis. The holding period starts with the new owners
How do you treat individual cap gains? Taxed at what?
LT: 20% is the max. 15% for everyone except people in the 10 or 15% income bracket where it will be taxed at 0%
ST: Tax rate - treat it as ordinary income
Net capital Loss deduction and carryback/forward rules for individuals?
3,000 is the max deduction and no carrybacks allowed, but carry forward forever
What is the depreciation years for MACRS Residential rental property and Nonresidential Real Property?
Residential - 27 1/2 SL
Nonresidential - 39 SL
Which is GAAP and Tax? Cost Depletion and Percentage Depletion?
Cost Depletion is GAAP
Percentage Depletion is Tax only
How many years do things get amortized over in Tax?
15 years straight line unless its business org and start up cost, it can be expensed 5,000 then the rest amortized by 15 years
How do you treat sec 1231 gains and losses and what are they for?
Business used assets. Treated as LTCG. Section 1231 losses in excess of section 1231 gains are treated as ordinary income
How do you treat section 1250 gains?
NBV is basis/cost recovery = no gain.loss
Accum Depr is depr recapture = ordinary income
SP in excess is Cap Gain 1231
When do you use section 1245 and section 1250?
1245 = Personal Property 1250 = Real Property
What is real property and personal property?
Real = land and building Personal = Machinery, equip, and auto
What is the De MInimis Rule? And what are the max amounts?
To expense items that could possible be capitalized. If the company has a F/S max is 5,000. If the company doesnt, max is 50
What is considered a small business that doesnt have to file a form 3115 when changing an accounting method?
Small businesses are those with less than 10 million in assets or avg annual gross receipts
How do you treat a formation of partnership? Taxable or nah? And what holding period is used? Basis?
No gain or loss unless services were rendered (FMV) or excess liability as a taxable boot. Use old assets holding period. and the basis is NBV or debt assumed
Are syndication costs deductible or nondeductible?
Nondeductible
What is a partners basis in the partnership?
Capital account plus % of liabilities
