Property - Basis and holding period Flashcards
Formula for adjusted tax basis in a piece of property
Original cost of property (includes delivery, installation costs)
+ Capital improvements (does not include repairs)
- Depreciation or amortization
= adjusted basis
What costs associated with buying a new piece of property are NOT included in the basis calculation
Repairs and maintenance are not included
*can typically tell if it’s repairs and maintenance based on it specifically saying to repair or to maintain
What is the standard holding period in most transactions
Date of acquisition
What is the holding period when an asset is gifted?
Depends on whether it is a gain basis or loss basis
if it is a gain basis - donors basis
Loss basis - date the gift is received
What is the holding period for inheritances
always considered long-term
What is the basis of inheritance
FMV at the date of death or alternative valuation date (6 months after death)
What kind of an asset is gifted property?
Capital assets
What are the three categories of assets?
- ordinary assets
- section 1231 assets
- capital assets
What are ordinary assets
Includes inventory, AR, notes rec.
What are section 1231 assets
Depreciable property used in a trade or business that has been owned for more than a year
What are capital assets
Other than what is listed as ordinary or 1231. Includes property held for INVESTMENT use or PERSONAL use
