Property Rules

Question 1

1231

Answer 1

assets used in trade or business and held for more than 12 months

Question 2

Losses on 1231

Answer 2

C Corps - only extent of cap gains
Individuals - $3,000 limit
Treated as an ordinary loss
Adj basis - sale price

Question 3

Gains on 1231

Answer 3

C Corp - offset by cap losses
Individuals- taxed at pref rates (0,15,20)
First recapture depreciation as ordinary, then left over is a capital gain

Question 4

section 1245 (gains only)

Answer 4

depreciable personal property used in trade or business - vehicles, computers, etc.

Question 5

upon the sale of a 1245 asset

Answer 5

lesser of gain rec or accumulated depc is recaptured as ordinary income and remaining gain is a section 1231 gain

Question 6

section 1250 (gains only)

Answer 6

depreciable real property used in trade or business for more than 12 months (warehouse or office building - NOT LAND)

Question 7

section 291 depreciation recapture

Answer 7

for C corps, 291 applies to section 1250 assets sold at a gain…the amount of ordinary income = 20% of the lesser of recognized gain or the accumulated straight line depreciation taken on the asset. Any remaining is 1231 capital gain

Question 8

section 1250 for individuals

Answer 8

gain is just a section 1231 gain

Question 9

overall net section 1231 gain for the year for an individual

Answer 9

called an unrecaptured sectoin 1250 gain, to the extent of lesser of: gain recognized or accumualted dep taken on asset

Question 10

related party transaction : sold higher than when given

Answer 10

you give to brother, then when brother sells to someone else he can use your orginal basis if it is sold even higher than that.

Question 11

gains are not recognized if you can HIDE IT -

Answer 11

homeowners exclusion, involuntary conversions, divorce settlements, like kind exchanges, installment sales, and treasury stock

Question 12

what is not allowed for installment sales

Answer 12

inventory

Question 13

installment method 3 steps

Answer 13

1. find gross profit (which is the gain realized) , 2. find GP % 3. GP% * cash payment = gain recognized

Question 14

how do you treat losses on installment sales?

Answer 14

must recognize in full in year of loss; cannot use installment sale for losses

Question 15

how do you treat section 1245 and 1231 gains

Answer 15

1245 cannot be used for installment sales; 1231 gains can be used in installment sales * but must add back depreciation recapture in year one

Question 16

casualty gains and losses

Answer 16

are not recognized if all of insurance money is reinvested within 2 years (for both gains or losses)

Question 17

like kind exchange - when something other than building is given

Answer 17

that other piece is a recognized gain