Property Taxation Flashcards
Section 1231
Depreciation Recapture
used against capital losses
Ways to Offset Property Sale
Losses (WRAP)
W - wash sale losses
R - related party transactions
A - and
P - personal losses
Property Losses
Wash Sale Losses
When security is sold for a loss and repurchased within 30 days before or after sale date
Basis = purchase price of new security + disallowed loss
Property Losses
Related Party Transactions
Not considered “arms-length” and therefore disallowed
Property Losses
Personal Loss
Nothing allowed
Itemized deduction may be allowed in category of causality and theft
1040
Schedule D
Capital Gains and Losses
Basis for Purchased Property
Cost + Capital Improvements
holding period = purchase date`
Basis for Gifted Property
NBV
“Donors Roll-Over Cost”
depreciation lower of FMV and NBV
Gifted Property Basis Exemption
NBV value unless…
FMV < Rollover Basis
depends on future sale of asset
1 - if sold > NBV = use NBV for gain
2 - if sold < NBV = use FMV for loss
3 - if sold between NBV and FMV = no gain/loss
Basis of Inherited Property
Step up (down) to FMV Date of Death FMV
exception = alternate valuation date
earlier of:
1 - date distributed
2 - max 6 months after death
Property De Minimus Rule
Capitalization policy must be written for non-tax purposes:
- prop. under $_ will be expensed
- prop. useful < 12 months will be expensed
Max allowed for tax is $5k if written, $2.5k if not
MACRS
Modified Accelerated Cost Recovery System
Used for majority of federal tax depreciation expense
MACRS Rules
machinery and equipment
Salvage value ignored
Half year convention = in year you buy/sell it
Mid quarter convention = if bottom heavy w/ 40% in Q4
MACRS
Real Property Rules
- Salvage value ignored
- No land cost / building only
- Residential property = 27.5 SL depreciation
- Nonresidential property = 39 SL depreciation
Mid month convention = 1/2 month when placed in service
Property Gain
Treasury and Capital Stock Transactions
Never realize acquisition of own stock