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Regulation > Property Taxation > Flashcards

Property Taxation Flashcards

1
Q

What is Real Property?

R4-3

A

–land and buildings, paving, etc.

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2
Q

What is Personal Property?

R4-3

A
  • -all property not classified as real property

- -machinery, equipment, and automobiles

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3
Q

What is the difference between Real vs Personal Property?

R4-3

A

Real:
–land and buildings

Personal:
–machinery, equipment, and automobiles

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4
Q

What are Capital Assets?

R4-3

A

Real and Personal property, such as:

  • -personal & real property, car not used in business
  • -interest in a partnership
  • -assets held for investment
  • -goodwill
  • -purchased copyrights, musical, artistic composition
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5
Q

What are NonCapital Assets?

R4-3

A
  • -Property included in inventory
  • -A/R from sale or service
  • -Section 1231 (business used Machinery & Equipment, land & building)
  • -Original Works: copyrights, musical or artistic compositions (artist’s inv)
  • -Treasury Stock
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6
Q

Gain or Loss Calculation

What is the calculation?

R4-8

A

Amount Realized
-Adj basis of asset sold
=Gain or Loss

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7
Q

Gain or Loss Calculation
How do you find Amount Realized?

R4-8

A

+cash received=boot
+buyer’s assumption of debt (excess=boot)
+FMV property/services received
-selling exp

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8
Q

Gain or Loss Calculation
How do you find the Adjusted Basis of Asset Sold?

R4-8

A

Purchased property = cost
Gifted property = cost
Inherited property = step-up FMV

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9
Q

Gain or Loss Calculation
What is the Adj Basis for Purchased property?

R4-8

A

Cost of property purchased
+Capital Improvements
-Accumulated Depreciation

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10
Q

Gain or Loss Calculation
What is the Adj Basis for Gifted property?

R4-9

A

General Rule: donor’s rollover cost/NBV
–Exception: lower FMV at date of gift if selling at loss

Holding period = same as donor’s holding period

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11
Q

Gain or Loss Calculation
What is the Adj Basis of Inherited property?

R4-11

A

General Rule: FMV at date of death

Alt Valuation Date: FMV earlier of
–distribution date of asset
or
–alt. valuation date

Holding Period: long-term

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12
Q

Which Gains are not taxed (excluded or deferred)?

R4-13

A

Gains are not taxed if you can “HIDE IT” (mnemonic)

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13
Q

Gains are not taxed if you can “HIDE IT” (mnemonic)

R4-13

A

H– Homeowner’s exclusion
I– Involuntary conversions
D– Divorce property settlement
E– Exchange of like-kind business/investment asset

I– Installment sale
T– Treasury and Capital stock transactions

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14
Q

Which Losses are non-deductible?

R4-25

A

“WRaP” up these lossed bc they are non-deductible (mnemonic)

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15
Q

Which Losses are “WRaP” up (non-deductible)?

R4-25

A

W– Wash Sale loss
R– Related Party transactions
A– and
P– Personal loss

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16
Q

Gains

Homeowner’s Exclusion
“H” in “HIDE IT” mnemonic

R4-13

A

Sale of personal principal residence can exclude from tax up to:

  • -$250,000 (SS, MFS, HH)
  • -$500,000 (MFJ, Widower)

must own and live in house for 2 yrs

17
Q

Gains

Involuntary Conversion
“I” in “HIDE IT” mnemonic

R4-15

A
  • -Insurance proceeds for destruction, theft, condemnation of property is not taxable if taxpayer reinvests.
  • -amount not reinvested, is taxable “boot”/loot
  • -reinvestment within:
    • personal: 2yrs after yr-end
    • business: 3 yrs after yr-end
18
Q

Gains

Divorce Property Settlement
“D” in “HIDE IT” mnemonic

R4-16

A

–nontaxable event

basis to recipient = carryover basis

19
Q

Gains

Exchange of Like-Kind Business/Investment
“E” in “HIDE IT” mnemonic

R4-17

A
  • -business trade-in or swapping real estate = not taxed
    except: inv, stock, securities, partnership interests, real property in foreign country

–Gain when boot received

20
Q

Gains

Installment Sale
“I” in “HIDE IT” mnemonic

R4-23

A
  • -rev recognize when cash is received
  • -TI = annual collection x gross profit %
GP= Sale-COGS
GP%= GP/Sale price
TI= cash collections x GP%
21
Q

Gains

Treasury and Capital Stock transactions
“T” in “HIDE IT” mnemonic

R4-25

A

exempt from gain (loss disallowed)

  • -sale of stock by corp
  • -repurchase of stock by corp
  • -reissue of stock
22
Q

Losses

Wash Sale loss
“W” in “WRaP” mnemonic

R4-25

A
  • -security (stock or bond) sold for a loss and repurchased within 30 days before or after date of sale
  • -loss disallowed
23
Q

Losses

Related Party transactions
“R” in “WRaP” mnemonic

R4-26

A
  • -siblings, spouse
  • -lineal descendants (father, son, grandpa)
  • -entities 50%+ owned
  • -in-laws are not related parties
Gain = taxable (except spouse and 50% owned entities)
Loss = not allowed

Basis is same as gift tax rules

24
Q

Losses

Personal loss
“P” in “WRaP” mnemonic

R4-27

A

–no deduction allowed for loss on non-business disposal or loss.

–itemized deduction available for casualty and loss

25
Q

Individual CG(L) rules

R4-27

A

Net CG rules

  • -L-T= 20%, 15%, 0% (> 1 yr)
  • -S-T= ordinary income (1 yr or less)

Net C(L) rules

  • -$3,000 max deduction
  • -CB never; CF forever
26
Q

Corporation CG(L) rules

R4-29

A

Net CG

  • -no deduction for S-T and L-T
  • -CB 3; CF 5 as S-T C(L)
27
Q

How are Losses treated?
operating vs indiv C(L) vs corp C(L)

R4-29

A

Operating loss: offset income; CB 2; CF 20
Indiv. C(L): $3k offset income; CB 0; CF forever
Corp. C(L): no offset income; CB3; CF 5

28
Q

MACRS Depreciation

Property other than real estate
(Machinery and Equipment)

What are the methods of depreciation?

R4-30

A

–salvage value ignored

Half-year convention
–if placed in service or disposed in mid of yr

Mid-quarter convention
–if >40% placed in service in last Q of yr

29
Q

MACRS Depreciation

Real Estate
(building)

What are the methods of depreciation?

R4-30

A

Residential Rental property
–27.5 yrs straight-line

Non-residential rental property
–39yrs straight-line

Mid-Month Convention
–half-month is taken for month placed in service or disposed of

30
Q

Expense deduction in lieu of depreciation
(machinery and equipment)

R4-31

A
  • -$500,000 limit
  • -reduced dollar for dollar if prop exceeds $2,010,000
  • -no deduction if loss
  • -SUV exp up to $25,000
31
Q

MACRS Depreciation

machinery and equipment vs real estate

R4-32

A

Machinery and Equipment

  • -half-year
  • -mid-quarter

Real Estate
–mid-month

32
Q

MACRS depreciation

What is the Half-year convention?

R4-30

A
  • -personal property placed in service or disposed of in middle of year
  • -midpoint of year is used
  • -for machinery and equipment
33
Q

MACRS depreciation

What is Mid-quarter convention?

R4-30

A
  • -if >40% of personal property is placed in service in the last quarter
  • -for machinery and equipment
34
Q

MACRS depreciation

What is Mid-month convention?

R4-31

A
  • -for real estate property
  • -half of the month is taken for the month placed in service or disposed of
  • -straight-line
35
Q

MACRS depreciation

For how many years is Residential rental property depreciated?

R4-30

A
  • -27.5 years
  • -straight-line
  • -half-month convention
36
Q

MACRS depreciation

For how many years is Non-Residential rental property depreciated?

R4-31

A
  • -39 years
  • -straight-line
  • -half-month convention
37
Q

Depletion

Tax vs GAAP

R4-33

A

Tax:
–percentage depletion (preference item for AMT)

GAAP:
–cost depletion (remaining basis/remaining units)

38
Q

Percentage Depletion

How much is deductible?

R4-33

A
  • -50% of TI is deductible

- -100% if oil and gas is deductible

39
Q

Intangible Amortization

Tax vs GAAP

R4-33

A

Tax
–15 year straight-line

GAAP
–impairment test- not amortized

Regulation (13 decks)

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