Federal and State Income Tax

Question 1

Income

Answer 1

any economic benefit realized from whatever source derived by a taxpayer unless the economic benefit is specifically excluded as income within the tax code

Question 2

What is used to adjust income tax for inflation in CA?

Answer 2

California Consumer Price Index

Question 3

Capital gains tax

Answer 3

tax on amount appreciated (not gross sales price) at sale

Question 4

Original basis

Answer 4

actual purchase price of property + costs to acquire (ie fees, closing costs)

Question 5

Section 1031 of IRC/tax-deferred exchange

Answer 5

any number of properties held for productive use in a trade or business or for an investment may be exchanged between owners → deferred capital gain taxes until substitute property is sold

Question 6

2 requirements of tax deferred exchange

Answer 6

1. Like for like property
2. Simultaneous

Question 7

Unlike property

Answer 7

personal use real property, cash, dealer inventory property, paper (ie mortgages, trust deeds, notes, land sale contracts)

Question 8

Boot

Answer 8

Property that does not qualify as like property that creates tax liability on gain derived

Question 9

Starker-deferred exchanges

Answer 9

IRC allows a taxpayer to create a tax-deferred exchange provided that the substitute property is identified within 45 days and the transaction closed within 180 days of the sale of a qualified property

proceeds of a sale of property must be held by an entity beyond the seller’s control in a Starker Trust until the seller can locate the like-kind property in which to invest the proceeds