ITX - 37 Flashcards
Typical Recovery Periods for Asset Classes:
Autos, most trucks, computers
5-year
Typical Recovery Periods for Asset Classes:
Office furniture and equipment (except computers), most machinery
7-year
Typical Recovery Periods for Asset Classes:
Residential rental property
27.5-year
Typical Recovery Periods for Asset Classes:
Nonresidential real property
39-year
Typical Recovery Periods for Asset Classes:
Land improvements
15-year
___ is the taxpayer’s investment in property
Basis
The original basis in property is usually the taxpayer’s ___.
cost
The basis will include payments made to acquire the property, such as ___.
commissions
advertising
SALES TAX
legal fees
Basis is adjusted ___ when a taxpayer takes depreciation deductions.
downward
Basis is adjusted downward when a taxpayer takes ___.
depreciation deductions
Basis is adjusted ___ when the taxpayer makes improvements to the property.
upward
Basis is adjusted upward when the taxpayer makes ___ to the property.
improvements
Basis: Non-related party purchase
Cost plus expenses of sale
Basis: Gifts
Donor’s basis is increased by the gift tax paid by the donor on appreciation (Except: if sold for a loss, FMV on the date of the gift, when less than donor’s basis)
Basis: Inherited assets
The FMV on date of death (or the 6-month alternate valuation date)
Basis: Assumption of debt
The buyer includes any debt assumed in the purchase price in his or her original basis
Basis: Improvements to tangible assets
Cost of improvements added to basis
Basis: Basket purchase (i.e., building and various land)
Purchase price is allocated to assets according to their relative FMV
Basis: Converted from personal use
Cost or FMV at conversion, whichever is less
Repairs are expensed by the taxpayer: therefore, the property’s basis ___.
does not increase
___ is allowed for recovery of the cost of assets purchased for use in a trade or business (including rental activities).
Depreciation
___ is allowed for the recapture of the cost of certain intangible assets.
Amortization
Original Issue Discount (OID): When clients purchase certain securities that will mature and pay back a maturity value greater than the amount paid, they will have a certain amount of interest ___ into current income, even though they have not received it.
imputed
Original Issue Discount (OID): Imputed interest will ___ the client’s basis in the asset and ___ any capital gain on the sale or maturity of the asset.
increase
reduce