Property Taxation Flashcards
Sales to Related Parties
Can’t take a loss on a sale of property to a related party
(Does NOT Include In-Laws who may be out-laws one day). Your loss rolls forward to the buyer, he adds it to his basis if he sells it for more than the original owners basis. For Example:
Stock w. a basis of $20,000 sold to your brother
He purchased it for $16,000
You get 0 Loss. His basis is $16,000 PLUS your disallowed loss of $4,000 = $20,000
If he sells it for $21,000 he has a $1,000 gain.
Sales to Related Parties (In Between Rule nets Zero)
Sam Sells Above——-Use David’s basis for Gain
David Jr’s Original Basis ______30,000______
Sam Sells Between ---ZERO GAIN OR LOSS
Sam’s Lower Purch Price _____20,000_______
Sam Sells Below 20K-Use Sam's Price(Basis) for Loss
Gain on Sale of Personal Residence
A Gain is not taxed if the taxpayer can “HIDE IT”
(H) Home Owner Exclusion ($250,000/$500,000 S/MJ)
( I ) Involuntary Conversion (as long as all is reinvested)
(D) Divorce Property Settlement not taxable
(E) Exchange of Like-Kind-Business/Investment Prop.
( I ) Installment Sale (Recognize as cash is received)
(T ) Treasury & Cap Stock Trans’s (FOR A CORPORATION - Sale,Repurch,Reissue) Indiv is taxed!
Non-Deductible Losses (WRaP up these losses-throw away)
WRaP (a=buy a vowel to make it work as a word)
W) Wash Sales(Repurchase 30/30 before or after
(R ) Related Party Transactions
(P ) Personal Loss
Individual Net Capital Gain/Loss Rules
Long-term - MORE than 1 year (Tax rate 20% maximum)
Short-term - ONE year or LESS (Treated as ord. income)
Unrecaptured Sec 1250 gain 25%
Gifted Property Gains/Losses (IF FMV IS LOWER AT GIFT DATE THAN DONOR’S BASIS)
Grandma gives kid her car she paid $10,000 for:
Kid Sells Above-------Use Grandma's basis (assumes donor's holding period)
Grandmas Original Basis ______10,000 _______
Kid Sells Between ---ZERO GAIN OR LOSS
FMV at date of Gift __6,000__
Kid Sells Below -----Use FMV as basis (New holding period starting at date of gift)
Section 1231 Property
Business Used Mach & Equipment, Land & Bldgs
Real property definition is
Land and everything permanently attached to it
Netting Procedures for Short-Term Capital Gains & Losses
Short-term Capital Losses (including carryovers) are Netted in this Order:
1) Short-term Capital Gains
2) Long-term Capital Losses from collectibles (28%)
3) Long-term Capital Gains from Unrecaptured Sec 1250 gains (25%)
4) Long-term Capital Gains taxed @ lower rates(15-20%)
Netting Procedures for Long-Term Capital Gains&Losses
Long-term Capital Losses (Including Carryovers) are Netted in this Order:
1) Net against long-term Capital Gains in the order of Highest Tax Rate first
Capital Assets Are:
Capital assets include property (real and personal) held by the taxpayer for investment, such as:
- Personal automobile of the taxpayer
- Furniture and fixtures in the home of the taxpayer
- Stocks and securities of all types (except those held by dealers)
- Personal property of a taxpayer not used in a trade or business
- Real property not used in a trade or business
- Interest in a partnership
- Goodwill of a corporation
- Copyrights, literary, musical, or artistic compositions purchased
- Other assets held for investment
Realized vs. Recognized
Recognized = Amt you are taxed on Realized = What you gained
These are not always the same.
In a Like-Kind-Exchange
You recognize (get taxed on) the LESSER of:
Gain realized OR the amount of boot received
Note: Realized loss is never recognized in like-kind exchanges.
In a Like-Kind-Exchange Gain Realized Formula
FMV of Asset Received
+ Any Boot Received
- Less Basis of Property Traded
=Gain Realized
In a Like-Kind-Exchange Gain New Basis Formula
Adjusted Basis of Property Given up
+ Gain Recognized
- Boot Received
= Basis of New Property
