Gains and Losses

Question 1

Gains and Losses

Answer 1

• Pg. 37-45; Code/Treas. Cited

* Pg. 45-53; Code/Treas. Reg. Cited

Question 2

IRC 109: Improvements by Lessee

Answer 2

GI doesn’t include income (other than rent) derived by a lessor of real property on the termination of a lease, representing the value of such property attributable to buildings erected or other improvements made by the lessee.

Question 3

IRC 1001: Computation of Gain or Loss

Answer 3

The gain from the sale or other disposition of property shall be the excess of the amount realized therefrom over the adjusted bases provided in section 1011 for determining gain, and the loss shall be the excess of the adjusted basis provided in such section for determining loss over the amount realized.

Question 4

IRC 1001: Amount Realized

Answer 4

The amount realized from the sale or other disposition of property shall be the sum of any money received plus the fair market value of the property (other than money) received.

Question 5

IRC 1001: Recognition of Gain or Loss

Answer 5

Except as otherwise provided in this subtitle, the entire amount of the gain or loss, determined under this section on the sale or exchange of property shall be recognized.

Question 6

IRC 1001: Recognition of Gain or Loss

Answer 6

Except as otherwise provided in this subtitle, the entire amount of the gain or loss, determined under this section on the sale or exchange of property shall be recognized.

Question 7

IRC 1001: Adjusted Basis for Determining Gain or Loss

Answer 7

The adjusted basis for determining the gain or loss from the sale or other disposition of property, whenever acquired, shall be the basis

Question 8

IRC 1012: Basis of Property/Cost

Answer 8

The basis of property shall be the cost of such property, except as otherwise provided.

Question 9

IRC 7701(g): Clarification of FMV in the Case of Non-Recourse Indebtedness

Answer 9

In determining the amount of gain or loss (or deemed gain or loss) with respect to any property, the FMV of such property shall be treated as being not less than the amount of any non-recourse indebtedness to which such property is subject.

Question 10

What is a “Sale or Other Disposition?”

Answer 10

• Increases/Decreases in property value aren’t taken into account for tax purposes as they accrue but only when they are realized by a taxable event (the realization requirement).

Question 11

Examples of Non-Realization Events

Answer 11

• Licensing Property
• Gratuitous Transfer of the Property
• Mortgaging Property for a Loan

Question 12

Examples of Realization Events

Answer 12

• Conversion to cash (a traditional sale)
• Exchange of property for other property
• Transfer of property to creditor in satisfaction of debt
• Insurance compensation for stolen/destroyed property

Question 13

Amount Realized

Answer 13

The amount realized from the sale shall be: The sum of any money received plus the FMV of the property.

Question 14

Cost Basis in General

Answer 14

The basis of property shall be:
• The cost of such property,
• increased by improvements and investments into the property.
• Decreased by any cost recovered (e.g., depreciation, insurance proceeds for partial destruction, etc.)

Question 15

Cost Basis in General (2)

Answer 15

• Determined when someone initially acquires the property.

* Basis = The amount the TP has invested into the property = cost.