Property And Taxation Flashcards
How many years of a tax return should be reviewed?
The IDFA recommends the review of 5 years worth of returns
What is the cost basis of property transferred incident of divorce?
There is no step-up in cost basis when assets are transferred incident to divorce
How is an annuity transferred incident to divorce?
The basis of the annuity is transferred and only gains or dividends are taxable
Section 1041
The IRS Code that permits spouses or former spouses to transfer property tax-free
Exceptions to IRA 1041 Non-Recognition Rules
Spouse is a nonresident alien or the transfer or services
What is unique about the transfer of US Saving Bonds pursuant to divorce?
The transferor must include the accrued interest on their tax return when they are reissued
Provisions to a 1041 Transfer
Occurs one year after divorce
The transfer is pursuant to the divorce decree and occurs not more than 6 years after the divorce
Losses on Personal Property
Are not tax deductible
Lis Pendens
A piece of property cannot be transferred during a pending lawsuit that may change the disposition of it once a notice has been filed in the public record
Recapture
Deductions taken in a previous year’s income
Quick claim Deed
A deed that conveys to the grantee only such interest in property as the grantor may have
The grantee assuming responsibility for any claims brought against the property
Non-resident is off the house deed but their name is still on the mortgage and therefore liable for the mortgage
Best way to accomplish ex-spouse buying out the other’s interest in the marital home
Resident spouse refinance the mortgage
Non-resident spouse takes another asset equal in value to the equity in the home
When can non-resident spouse claim capital gain exclusion?
As long as they retain title to the residence and continue to own the residence
Tax Reform Act of 1984
- Added Section 1041
- Simplified the definition of spousal support and it prevents property settlements from being disguised as spousal support
Sale cost
Included in taxable gain calculation
FMV - cost basis - sale costs
Jointly Owned Home
Both parties can shelter $250,000 from capital gains tax for a total of $500,000
Net value of martial property
Current equity- original equity
Loss on personal property
There is no capital loss or deduction for loss on personal property
Capital gain realized
Does not include exclusion
Use capital gains exclusion when
Question asked taxable gain or what is reported in tax return
Taxable capital gain
Include capital gain exclusion
How much gain will be realized on sale of house?
Do not include capital gain exclusion
Taxable gain on house= include capital gain exclusion
Taxable gain
Use capital gain exclusion
How much Capital gain will be realized on sale of the house?
No capital gain exclusion
