Property Tax Flashcards
What is considered adaptation
It is when property is used for a new or different use that originally intended
Example - converting a machine for another purpose
CAPITALIZE costs
What is betterment
This is when you make something bigger, better or faster
CAPITALIZE costs
What is restoration
Restore something to its original basis by replacing or fixing major parts
CAPITALIZE costs
What are capital assets
This is all property held by a taxpayer
What are a canvas portrait of a client in the hands of the painter considered
inventory - ordinary asset
What are depreciable fixtures in a business parking lot
depreciable property used in business and real estate
What is accounts and notes receivable arising from sales or services; copyrights, literary, musical, or artistic compositions; or treasury stock.
property used in business 1231 Asset
for related party transactions - what defines constructive ownership
Include is an individuals family
sibling
parents
spouse
kids
What are the 1231 rules
If 1231 is held for LESS than 1 year
BOTH gain and losses are ordinary
If 1231 is held for MORE than 1 year
LOSS - is ordinary
GAIN - is capital Gain that goes to schedule D
What is the special rule for listed securities for cash based tax payers
For securities gains and losses will be realized on the trade date on a year end sale of listed stocks
What is a like kind exchange
This is said to have occurred when property used in a trade or business or held as an invested is exchanged for other property of the same type
Example - real property
a vacant lost for a corporate office building
This is a non-taxable event
can you exchange inventory in a like kind exchange
no
can you exchange stocks, bonds, notes, convertible securities as a like kind exchange
no - securities are specifically excluded
can you exchange partnership interest in a like kind exchange
no
can you exchange property held for personal use in a like kind exchange
NO
Can you exchange an apartment building for unimproved land in a like kind exchange
YES they are considered the same class of property
What is the rule about selling a house that is your primary residence
single 250 MFJ 500
Must use it as you primary residence for 2 of the last 5 years
It you have to sell sooner that that because of a change in jobs or health etc - then this would apply as well
The result is that there would not be a any gain recognized
Who is subject to the uniform capitalization rules
They apply to a taxpayer who makes real or tangible personal property used in trade or business
or for real or personal property, tangible an din tangible personal property acquired for resale if gross receipts are greater than 10 Million in last 3 tax years
What are the UNICAP rules
you must capitalize direct costs and allocable portion of indirect costs that are part of the production or resale activity
These cost are capitalized into inventory
What is the definition of a capital asset
ALL property held by the taxpayer except
Inventory Depreciable property or real estate used in business A/R or N/R Copyrights Artistic creations Treasury Stock
What is inventory, A/R, artistic works, N/R considered
They are “hot Assets”
Ordinary Assets
Used in less than 1 year
Taxed at the ordinary tax rate
What are marketable l securities considered
Capital Assets
What is treasure stock considered
Ordinary Asset
What is the qualified small business stock exclusion
If you are a non corporate shareholder go a qualified small business stock for at least 5 years
Then you can exclude any gain
ceiling GREATer of 10X basis or 10M minus previous exclusions
what is section 1250 property
thi sis when you recapture depreciation on real property when you sell it as a gain.
You are basically allocating the gain from the sale to ordinary gain for the amount of execrated depreciation over S/L
The rest is reported as long term capital gains
If a company has a capital loss how MUST it treat it
They are REQUIRED to carry the loss back three years and then carry the rest forward 5 years
It is not an option
What is considered boot
This is the cash you get plus the debt you give up
100 cash 200debt they assume = 300 in total boot
What is section 1244 stock
This is stock that that is for small US business where you can deduct 50K single up to 100K ordinary Loss Married for a loss
What if you inherit 1244 stock
You can not take this deduction because you are not the original purchaser. So you loss would be considered a LT capital Loss
IS A majority shareholder and a corporation considered related parties
YES
IS a nephew or niece considered a related party
No
How much capital loss can a HOH claim each year
3000
How much capital loss can MFSeparate take each year
1500
What is an option to purchase capital stock considered
It is a capital asset - if you let the option lapse and take a loss - it is considered a short term loss
What is the de minimums 263 rule
You can expense the cost of an item or per invoice up to 5K
5,000 is the safe harbor amount
If property has useful lief of 12K or less ten is can be expensed as well
What is section 1245
This is when depreciation perviously taken is recaptured in ordinary income when property is sold
It is the LESSER of
the gain realized or the depreciation taken
If a security becomes worthless how do you treat it
When an investment security becomes worthless it is treated as if it is sold on the last day of the tax year in which it becomes worthless.
