Exam Review #1 Flashcards
Tantum exchanged farmland for an office building. What is Tantum’s recognized gain.
FMV office building $350,000
Liabilities relieved 120,000
Amount realized $470,000
Less: AB farmland (250,000)
Less: Liabilities assumed (70,000)
Gain realized $150,000
$120,000 Liability Relief - 70,000 Liabilities assumed = $50,000 gain
Gem purchased $50,000 of goodwill and a $13,000 covenant not to compete. for tax purposes what amount of these intangibles should be amortized
$63,000
The cost of certain intangibles acquired (not created) in connection with the conduct of a trade or business or income-producing activity is amortized over a 15-year period
How is the depreciation deduction of nonresidential real property, placed in service in 2014 determined for regular tax purpose
Straight-line method over 39 years
What amount of capital can an individual deduct in arriving at the adjusted gross income
$3,000 of capital losses can be deducted from ordinary income each year
An individual tax payer who has elected to amortize the premium on a bond yielding taxable interest income. Increases or decreases the basis in the bond
If the premium in the bond is amortized the basis of the bond must be reduced by the amount of premium that is amortized.
Stocks that are inherited at
FMV
Self-employed person sells office furniture purchased 4 years ago for $30,000 for 37,000. The depreciation taken was $20,700. What part of the gain is taxed as Long-term capital gain.
Sec. 1245 property is depreciable personal property (e.g., office furniture). Gain on the disposition of Sec. 1245 property is ordinary income to the extent of the lesser of all depreciation taken or gain realized. The realized gain in excess of the depreciation taken may be treated as a gain from the sale or exchange of Sec. 1231 property (i.e., capital gain). The realized gain of $27,700 is greater than the depreciation taken ($20,700) by $7,000. Because the holding period is greater than one year, the gain is long-term.
Capitalized acquisition costs is equal to
Cost Basis
- Purchase price
- Major improvements
- Closing costs
- Other misc. costs
When more than one asset is purchased for a lump sum, the basis of each is computed by
apportioning the total cost based on the relative FMV of each asset
Basis in inherited property is the
FMV on the date of death or 6 months after if the executor elects the alternate valuation date for the estate tax return
The basis of stock acquired in a nontaxable distribution is allocated
a portion of the basis of the stock upon which the distribution was made.
If the FMV of the stock rights is less than 15% of the FMV of the stock upon which it was issued, the rights have a zero basis (unless an election is made to allocate basis).
ADS alternative depreciation system is required for which listed property
- Listed property;
- Property used, leased, or financed by tax-exempt organizations;
- Tangible property used predominantly outside the U.S.; and
- Imported property from a country that engages in discriminatory trade practices.
Acquisition costs of leases are amortized over what period
over the term of the lease
Capital Assets
All property is characterized as a capital asset, unless expressly excluded
An individual may carry forward any excess capital losses
indefinitely
The disposition or worthlessness of Section 1244 stock is treated as
Ordinary loss
- Single $50,000 loss
- MFL $100,000
Gain on disposition of Section 1245 property is
Ordinary income to the extent of the lesser of all depreciation taken or gain realized
Neither Section 1245 nor Section 1250 applies to
Gifts, bequest, devise, or intestate succession disposition
Apartment building sold for $210,000 with a cost of $200,000 and accumulated depreciation of $160,000. What should the person report on his 2014 tax return
Section 1231 gain of $210,000 - $160,000 =$50,000
As the property is depreciable, personal, trade or business property, it is subject to section 1245 recapture rules which provide that any gain realized, to the extent of the lesser of gain realized or depreciation taken. The gain is characterized as
Ordinary Income. Since the depreciation exceeds the realized gain, the entire gain is characterized as ordinary income.
A dad sells stock of $10,000 to his son that he for 7,000. He son sells the stock for 6,000 to an unrelated party, what will the son report on his tax return for this sale
A short term capital loss of 1,000, because losses are not allowed between related party transaction
Capital assets are
Property held by the taxpayer not used in a trade or business or depreciable business property
Section 1245 gain is reported as
Ordinary Income
Sales Price $200,000
Adjusted bases
Cost $160,000
Depr. (60,000)
Adjusted basis ($100,000)
Amount Realized
$100,000
Dep 1245 60,000The cost of intangibles acquired in connection with the conduct of a trade or business or income-producing activity is
amortized over a 15 year period
Basis in corporations stock after stock dividends
The allocation of basis in the stock is made based on the relative fair market values on the date of distribution for each of the two different blocks of stock, rather than by averaging them.
Basis in a property by gift with gift tax
FMV - AD / FMV-Exemption multiplied by the gift tax
Taxation of capital Gains
15/20% Basket for taxpayers
25% Basket
Section 1250 un-recaptured depreciation from real property held for more that 12 months
28% Basket
Sale of collectible
Sec. 1202 stock gains
Section 1231 property is
Capital assets in connection with a trade or business held for more than 1 year and include
- Real property
- Depreciable property
- involuntary converted capital assets
If a security becomes worthless in the current taxable year, it is treated as sold or exchanged on
The last day of the current taxable year
ADS must NOT be used for
Tangible property leased to a person owned or used the property in 2015
MACRS provides two systems for depreciating property placed in service after 1986: the general depreciation system (GDS) and the alternative depreciation system. Although GDS is used for most property, ADS is required by law for any tangible property used predominantly outside the United States, any tax-exempt use property, and any tax-exempt bond-financed property.
How long can a Capital loss carryovers be for individuals and estates
unlimited for individuals but no carryovers are allowed for a decedent estate
The excess return on capital from a distribution is treated as a
capital gain
