Gains on dealing in property Flashcards
gains on dealings in property and section #
is gross income section 1001
two concepts of gains on dealing in property
AR- Amount realized
and Adjusted basis
Adjusted basis section
61 a 3; 1016
default rule for basis
cost - what you paid, 1011
basis 1st way
after tax investment in propetty
In Amount realized you get bases
back tax free
adjusted basis includes
improvements to property- you can add to basis.
taxpayers like 3 things
- tax exempt income
- deferred tax
- basis
basis- second “Easy way”
borrowed money
borrowd money counts in basis because
notion that it will paid back with after tax income
does refianncing count in basis:
depends on what the $ goes to. vaca- no romodeeling house, YES
TAXES DEFERRED =
taxes saved/ interest free loan from govt.
basis- and debt relief
included, just like you got cash. 1.001-2
cash and basis
1001b
how to calculate gains
1001 AR-AB
NON REcognition if income SECTION
1031
if you sell tracts of land in diffrent years
equitable apportionment must value tracts fairly, sellign expenses reduce AR
Two ways to assume debt
- novation 2. delegation of duties
novation
purchaser replaces seller on debt as debtor. Lets seller of hook, Requires new agreement with buyer.
delegation of duties
ii. Delegation of duties: But the seller remains liable if the purchaser doesn’t pay. Seller will always get indemnity clause where they can recover from the buyer.
debt included in ar EVEN IF seller is liable section
1.1001 2 a 4
