Property Taxation

Question 1

Basis of property received as a gift

Answer 1

If sold for a gain, donor’s original cost.

If sold for a loss, FMV at time of gift.

If selling price is lower than donor’s cost, but higher than FMV, neither G/L is recognized.

Question 2

Property received as an inheritance

Answer 2

Generally the basis is FMV at DOD.

Alternative Valuation Date - FMV 6 months after DOD.

Always LT capital gains

Question 3

Wash sale

Answer 3

Sale of identical stock for a loss within 30 days.

Adjust basis = new stock purchase + disallowed loss

Question 4

Organization & Start up costs

Answer 4

Up to $5k deductible in the first year. Excess amortized over 180 months. Deduction is reduced by amount exceeding $50k.

Question 5

MACRS

Answer 5

General Depreciation System (GDS) - larger of declining balance or straight line. Whichever is greater.

Alternative Depreciation System (ADS) - straight line.

Half year, Mid quarter, or Mid month convention.

Question 6

De Minimis Safe Harbor

Answer 6

Policy to expense low cost personal property.
With Applicable FS (AFS) can deduct up to $5k, Without (AFS) can deduct $2,500 per item. *If cost of the item is more, then the entire cost is capitalized.

Question 7

Collectibles & Qualified Small Business Stock

Answer 7

Taxes at maximum 28% tax rate.

Exclusion: greater of $10 million or 10X basis

Question 8

Nonbusiness bad debt losses

Answer 8

Treated as short term capital losses in the year they become worthless

Question 9

Personal use asset = capital asset

Answer 9

Sold for a gain is a taxable capital gain.

Sold for a loss is a nondeductible personal loss.

Question 10

Depreciation

Answer 10

3 yr: Special tools & race horses
5 yr: Automobiles & computers.
7 yr: Furniture & fixtures, machinery & equipment.
10 yr: Boats & water transportation.
15 yr: Improvements
20 yr: Farm buildings and municipal sewers:
27.5 yr: Residential real property(SL)
39 yr: Nonresidential real property(SL)

Question 11

Personal property converted to business

Answer 11

Basis is lesser of adjusted basis or FMV

Question 12

Section 179 Deduction

Answer 12

100% immediate expense of asset.
Limitation:
$1,220,000 allowable deduction.
$3,050,000 property placed in service phases out on dollar for dollar basis.

Bonus depreciation is 60% for the year.