Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

REG 3 > Module 2: Taxable and Nontaxable Dispositions > Flashcards

Module 2: Taxable and Nontaxable Dispositions Flashcards

1
Q

What is the difference between realized and recognized?

A 
Realized = Real worlds
Recognized = Record on the records/tax return
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is the formula for calculating gain or loss at disposition?

A

Amount realized

= Gain or Loss

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

When would a gain not be recognized?

if you can HIDE IT, you don’t have to recognize it

A 
Homeowner's exclusion
Involuntary conversion
Divorce property settlement
Exchange of like-kind (business)
Installment sale
Treasury capital stock
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

When would a loss not be recognized?

WRaP up your losses, and throw them away

A

Wash sale losses
Related party losses
and
Personal losses

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Taxable gain

A

Realized gain to the extent of boot/loot recognized

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

HOMEOWNER’S EXCLUSION (Hide it)

What is the homeowner’s exclusion for?

A

An exclusion related to the sale of the taxpayer’s personal principal residence

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

HOMEOWNER’S EXCLUSION (Hide it)

What is the exclusion amount?

A

$500K available for married couples
$250K available for single, MFS, or HH

Excess gain is taxable

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

HOMEOWNER’S EXCLUSION (Hide it)

How do you qualify for the exclusion?

A
  1. Taxpayer must have owned & used the property as a principal residence for 2+ years during 5 year period ending on date of sale/exchange
  2. Periods of ownership & use do not have to be continuous; HOWEVER, gain eligible for excusion may be reduce b/c nonqualified use
  3. Either spouse for joint return must meet ownership requirement, but both spouses must meet use requirement for $500K exclusion
  4. Widow/widower sells home that surviving spouse owned/occupied w/decedent spouse ==> suriving spouse entitled to full $500K if sold w/in 2 years of death
  5. No age requirement
  6. No rollover to another house
  7. Exclusion is renewable
  8. May use as often as available over lifetime, but not more than once every 2 years
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

HOMEOWNER’S EXCLUSION (Hide it)

What is the nonqualified use provision?

A

Nonqualified use is any use of the home for a reason other than use as a principal residence

Prorate gain exclusion

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

HOMEOWNER’S EXCLUSION (Hide it)

Hardship provision

A

Partial exclusion if the sale is due to a change in place of employment, health, or unforeseen circumstances

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

HOMEOWNER’S EXCLUSION (Hide it)

What is the max exclusion for the hardship provision?

A

Calculated as the months of qualifying ownership divided by 24 months multiplied by the max exclusion available to the taxpayer

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q 
INVOLUNTARY CONVERSIONS (hIde it)
What is the rationale for involuntary conversions of property?
A

The taxpayer’s reinvestment of the involuntaryily received proceeds restores him to the position he held prior to the conversion

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q 
INVOLUNTARY CONVERSIONS (hIde it)
To what extent would the gain on an involuntary conversion be recognized?
A

To the extent of the amount not reinvested (taxable boot/loot)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q 
INVOLUNTARY CONVERSIONS (hIde it)
What is the replacement period for personal property?
A

Two years from year-end

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q 
INVOLUNTARY CONVERSIONS (hIde it)
What is the replacement period for condemned business property?
A

Three years from year-end

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q 
INVOLUNTARY CONVERSIONS (hIde it)
What is the basis of property acquired as a result of involuntary conversion?
A

Cost of such property decreased by the amount of any gain not recognized upon such conversion

Basis = Nontaxable = NBV

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q 
INVOLUNTARY CONVERSIONS (hIde it)
When is a gain recognized?
A

When there is boot (amount received exceeds the cost of replacement

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q 
INVOLUNTARY CONVERSIONS (hIde it)
What is the basis of replacement property when a gain is recognized?
A

Basis = cost - gain not recognized

19
Q 
INVOLUNTARY CONVERSIONS (hIde it)
What are the rules for losses?
A

Losses are recognized and the basis of the replacement property is the replacement cost

20
Q

DIVORCE PROPERTY SETTLEMENT (hiDe it)

What is the rule for gains from divorce property settlement?

A

When a divorce settlement provides for a lump-sum payment or property settlement, it is a nontaxable event

The basis to recipient spouse will be carryover basis

21
Q

EXCHANGE OF LIKE-KIND BUSINESS/INVESTMENT ASSETS (hidE it)
What are the exceptions regarding nonrecognition treatment to gains on like-kind exchange of property used in trade/business or held for investment?

A 
Inventory
Stock
Securities
Partnership interest
Goodwill/going concern value

(Things on “paper”)

22
Q

EXCHANGE OF LIKE-KIND BUSINESS/INVESTMENT ASSETS (hidE it)

What is qualifying property?

A

Real property = Does not have to be same “general” use

Personal property = must be same “general” use

23
Q

EXCHANGE OF LIKE-KIND BUSINESS/INVESTMENT ASSETS (hidE it)

What are the two ways the CPA exams tests this?

A

Business trade-in
OR
Swapping real estate

24
Q

EXCHANGE OF LIKE-KIND BUSINESS/INVESTMENT ASSETS (hidE it)

What are the timing requirements that must be met for a like-kind exchange to receive deferral treatment?

A
  1. Must ID like kind replacement property w/in 45 days of giving up their property
  2. Like-kind property must be received by the earlier of:
    - 180 days after transfer of property
    - Tax return filed
25
Q

EXCHANGE OF LIKE-KIND BUSINESS/INVESTMENT ASSETS (hidE it)
What happens when property other than quailfying property is received (i.e. cash, relief of liabilities, nonqualifying property)?

A

The transaction produces a recognized gain

Recognized gain = lower of realized gain or boot received

26
Q

EXCHANGE OF LIKE-KIND BUSINESS/INVESTMENT ASSETS (hidE it)

How do you calculate the basis in like-kind property rec’v when boot is rec’v?

A

FMV of like-kind property rec’v

+ Deferred loss
= Basis

27
Q

EXCHANGE OF LIKE-KIND BUSINESS/INVESTMENT ASSETS (hidE it)

How are losses handled in like-kind exchanges?

A

Realized losses are NOT recognized

28
Q

EXCHANGE OF LIKE-KIND BUSINESS/INVESTMENT ASSETS (hidE it)

How is adjusted basis calculated?

A

Original cost - Depreciation = Adjusted Basis

29
Q

EXCHANGE OF LIKE-KIND BUSINESS/INVESTMENT ASSETS (hidE it)

How is the amount realized calculated?

A

FMV of new property rec’v + FMV of boot rec’v - FMV of boot paid = Amount realized

30
Q

EXCHANGE OF LIKE-KIND BUSINESS/INVESTMENT ASSETS (hidE it)

How is gain/loss recognized calculated?

A

The lesser of realized gain or boot rec’v (realized loss is never recognized)

31
Q

EXCHANGE OF LIKE-KIND BUSINESS/INVESTMENT ASSETS (hidE it)

How is boot received calculated?

A

Cash rec’v + FMV of non-lik-kind property rec’v + Net relief from liability

32
Q

EXCHANGE OF LIKE-KIND BUSINESS/INVESTMENT ASSETS (hidE it)

How is boot paid calculated?

A

Cash paid + FMV of non-like-kind property paid + Net liability assumed

33
Q

EXCHANGE OF LIKE-KIND BUSINESS/INVESTMENT ASSETS (hidE it)

How is deferred gain calculated?

A

Realized gain - Recognized gain

34
Q 
INSTALLMENT SALES (hide It)
How are payments for installment sales handled?
A

Taxed when cash payments are rec’v

35
Q

TREASURY AND CAPITAL STOCK TRANSACTIONS (hide iT)

Which corporate transactions are exempt from gain (and any losses disallowed)?

A
  • Sales of stock by corporation
  • Repurchase of stock by corporation
  • Reissue of stock
36
Q

WASH SALE LOSS (Wrap)

When does a wash sale exist?

A

When a security is sold for a loss and is repurchased w/in 30 days before or after the sale date

Loss is disallowed

37
Q

WASH SALE LOSS (Wrap)

What is the basis of repurchased security in a wash sale?

A

Purchase price of the new security + Disallowed loss

38
Q

WASH SALE LOSS (Wrap)

What would be the date of acquisition of the repurchased security?

A

Date of acquisition of the original security

39
Q

WASH SALE LOSS (Wrap)

What happens if there is a gain resulting from the sale of a security and it is repurchased w/in 30 days??

A

Cannot use “substituted basis”

Must pay capital gains tax and use the new purchase price as basis

40
Q

RELATED PARTY TRANSACTIONS (wRap)

Who would be considered a related party?

A
  1. Family

2. > 50% owned business

41
Q

RELATED PARTY TRANSACTIONS (wRap)

How would you calculate the basis?

A

Use gift tax rules

42
Q

PERSONAL LOSS (wraP)

A

No deduction allowed for loss; itemized deduction may be available

43
Q

Ho is the basis for like-kind exchanges computed?

A

Basis of old property
Less: Boot received

OR

FMV of New Van
+ Deferred Loss

REG 3 (5 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions