Federal Taxation of Property Transactions - 12-22%

Question 1

What is an Ordinary asset

Answer 1

Inventory, A/R, and Note Receivables

Question 2

What is a Section 1231 Asset?

Answer 2

Depreciable property used in a trade or business that have been owned for more than a year

Question 3

What is a capital asset?

Answer 3

Assets other than ordinary, or 1231 assets, and include property held for investment, or personal use. Keyword is “investment”

Question 4

For a cash-basis taxpayer, gain/ loss on a year-end sale of a listed stock arises on the

Answer 4

Trade date

Question 5

How are C corp net capital losses treated?

Answer 5

Back 3 forward 5

Question 6

Section 1244 Stock: How are gains treated from the sale of 1244 stock?

Answer 6

Gains: LTCG

Question 7

Section 1244 Stock: How are losses treated from the sale of 1244 stock? What is the maximum deductible loss allowed?

Answer 7

Ordinary losses, with a max deduction of $100k (for MFJ, $50k of all other filers)

Question 8

What is a special consideration for determining if the seller of Section 1244 stock applies?

Answer 8

The stock must be sold by the ORIGINAL holder for Section 1244 rules to apply

Question 9

What is the depreciable life of nonresidential real property? What type of convention is used?

Answer 9

39 years. Mid-month convention

Question 10

What is the formula to determine a gain from a like-kind exchange?

Answer 10

FMV of new propery
Plus: Boot
Plus: Debt relieved
Less: (Debt assumed)
Less: (NBV)
Equals: Realized gain

Gain recognized to the extent of boot.
Boot includes the relief of debt in addition to cash.

Question 11

What is the formula to determine a gain for Involuntary conversions?

Answer 11

Amount realized from conversion
(Adjusted basis of old property)
= Realized G/L

Amount realized from conversion
(Cost of replacement property)
= Recognized gain, limited to realized gain

Question 12

How do you determine the Adjusted basis of the new property purchased from Involuntary conversions?

Answer 12

The adjusted bases of the new property is its cost reduced by any deferred gain.

Question 13

Who is considered to be a related party for individuals for the loss disallowance rule?

Answer 13

Brother, sister, spouse, ancestor, and decedents.

NOTE: Grandparents are not included in this rule.

Question 14

How do you calculate the amount of loss disallowed in a wash sale?

Answer 14

Determine the realized gain from the original transaction. Dive the remount of shares repurchased, by the number of shares sold. Multiply that percentage by the overall loss. This is the amount of the loss not recognized.