Property rules/ Corp Taxes (II)

Question 1

Can you REALIZE losses on like-kind exchanges?

Can you recognize them?

Answer 1

Yes

NO!

Question 2

What will BOOT do in a like-kind exchange?

Answer 2

When you give it: It LESSES the FMV of the new asset you are receiving for realized/recognized gain purposes.

When you get it: it INCREASES the FMV of the new asset you are receiving for realized/recognized gain purposes.

Question 3

Basis in new like-kind property?

Answer 3

Adj Basis of Property given up + Recognized GAIN - Boot Received

(EG: $17K + $3K rec gain - $3.5 addit’l boot rec.) = $16,500 new adj. basis in property

Question 4

How to calculate Realized gain in like-kind exchanges?

Answer 4

Amount Realized =

FMV asset received + Boot received - adj basis of auto given up

(poss you will LESS boot if you gave any)

Question 5

What is Recognized gain?

Where else does it factor in?

Answer 5

Recognized gain is the LESSER of boot received or realized gain.

When calculating adj. basis in new asset, you will add recognized gain to the Old asset (and less any boot received) in order to arrive at new adj. basis.

Question 6

How does taxpayer-paid cash affect Realized gain in like-kind exchanges?
How does it affect basis in new prop. received?

Answer 6

TP cash in REALIZED gain: subtract it from the realized gain you calculate

TP cash given as far as basis in new prop: After you calculate basis in new prop, ADD the TP cash back in!

Question 7

What is Installment Method?

Answer 7

Installment method is tax method of reporting gains (NOT LOSSES) for sales made by “nonmerchants” in personal prop, and “nondealers” in real estate.

Question 8

When do you recognize gain on installment sales?

Answer 8

When Cash is Received.

Question 9

Reportable installment sale Gain/Loss is based on a pro-rata portion. What are the 3 formulas?

(hint: Gross Profit, Gross Prof. %, Earned Rev/Taxable Income)

Answer 9

1) Gross Profit = Sale - COGS
2) Gross Prof. % = Gross Prof/Sales Price
3) Earned Rev/Taxable Income/Gain Recognized in year of SALE = Cash Collections x GP%

Question 10

Dif. between gift basis and basis of stock when received for services?

Answer 10

Gift basis = usually original holders’ basis

Rec. for services = FMV of stock rec.

(recognize gains and losses on sales accordingly)

Question 11

IS their income tax on the value of inherited property?

Answer 11

A: No.

Question 12

What is the gain exclusion on residences lived in for at least 2 of past 5 years upon sale?

Answer 12

Indiv: $250K
Married Couple: $500K

YOU STILL REALIZE certain gain, you just don’t recognize it.

Question 13

When you acquire descendant property, what type of gain or loss will u rec. on sale (LT or ST?)

Answer 13

ALWAYS LT

Question 14

Definition of like-kind exchange?

Answer 14

Real prop. exchanged for real prop.

Must be same TYPES of real property, and not different asset classes.

Question 15

Between parent and child, can stock loss be realized? Recognized?

Answer 15

Yes. No.

Question 16

What are Section 1231 assets?

Answer 16

Depreciable business assets held for longer than a year.

This CAN include LAND used in business.

Question 17

What happens when Section 1231 assets are also personal property?

Answer 17

Section 1245 rules will apply to gains:

Wherein, lesser of GAIN RECOGNIZED or ACCUMULATED DEP. is recaptured as Ordinary Income under Section 1245.

Any gain in excess of Accumulated Dep. will then be treated as Section 1231 gain.

Question 18

General Rule about Estates taxability?

Answer 18

Estate is taxable at FMV.

Question 19

When must you file a Form 706 Estate Tax?

At what point in time to file?

Answer 19

An estate must file a 706 if the GROSS VAL. of estate plus Historical Taxable Gifts by Descedent exceeds

$5.43 Mil

(in 2015)

FILE W/IN 9 months of Descedant death unless you ask for extension.