Property Taxation Flashcards

1
Q

Section 1231

A

Depreciation Recapture

used against capital losses

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2
Q

Ways to Offset Property Sale

Losses (WRAP)

A

W - wash sale losses
R - related party transactions
A - and
P - personal losses

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3
Q

Property Losses

Wash Sale Losses

A

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

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4
Q

Property Losses

Related Party Transactions

A

Not considered “arms-length” and therefore disallowed

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5
Q

Property Losses

Personal Loss

A

Nothing allowed

Itemized deduction may be allowed in category of causality and theft

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6
Q

1040

Schedule D

A

Capital Gains and Losses

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7
Q

Basis for Purchased Property

A

Cost + Capital Improvements

holding period = purchase date`

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8
Q

Basis for Gifted Property

A

NBV
“Donors Roll-Over Cost”

depreciation lower of FMV and NBV

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9
Q

Gifted Property Basis Exemption

NBV value unless…

A

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

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10
Q

Basis of Inherited Property

A
Step up (down) to FMV
Date of Death FMV

exception = alternate valuation date
earlier of:
1 - date distributed
2 - max 6 months after death

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11
Q

Property De Minimus Rule

A

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

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12
Q

MACRS

A

Modified Accelerated Cost Recovery System

Used for majority of federal tax depreciation expense

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13
Q

MACRS Rules

A

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

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14
Q

MACRS

Real Property Rules

A
  • 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

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15
Q

Property Gain

Treasury and Capital Stock Transactions

A

Never realize acquisition of own stock

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16
Q

Property Gain

Installment Sale

A

Taxed when cash payments are received

17
Q

Property Gain

Exchange of like-kind (business) property

A

Not excludable for “things on paper”: (remote) inventory, stock, securities, partnership interests, goodwill, property in other countries

Replacement ID’ed within 45 days

Received within 180 days or tax return filed

18
Q

Exchange of like-kind (business) property

Real Property

A

Does not have to be the same “general” use

19
Q

Exchange of like-kind (business) property

Personal Property

A

Must be same “general” use

20
Q

Property Gain

Divorce Property Settlement (basis)

A

Basis = NBV = nontaxable

21
Q

Property Gain

Involuntary Conversions

A

Must receive insurance proceeds into similar property

Excess = taxable loot

Reinvest within 2 years / 3 years for business property

22
Q

Property Gain

Homeowners Exclusion

A

Principle residence for 2+ years during 5 prior to sale

$500k to married couples
$250k for singles

non-qualified use for attempt to sell or rental property

23
Q

Ways to Offset Property Sale Gain

A

HIDEIT

H - homeowners exclusion
I - involuntary conversions
D - divorce settlements
E - exchange of like-kind (business) property
I - installment sale
T - treasury capital and stock
24
Q

Calculating Gain / Loss at Disposition

A

Amount Realized
- Adjusted Basis of asset sold
= Gain or Loss

25
Q

Section 1231 Gains

A

Determined by either 1245 or 1250

26
Q

1245 Gains

A

Machinery and Equipment (over 12 months)

lesser of - gain recognized or all acc. dep.
is recaptured as ordinary income

any remaining gain is 1231 gain

27
Q

1250 Gains

A

Real properties (over 12 months)

recaptures only dep. over SL

28
Q

1231 Loss

A

Treated as ordinary loss (not capital)

29
Q

MACRS Personal Property

A

Anything other than Real Property

3/5/7/10 yr = depreciate using 200% declining balance
15/20 yr = depreciate using 150% declining balance

30
Q

MACRS Conventions

A

Machinery and Equipment

  • half-year
  • mid-quarter

Real Estate
- mid-month

31
Q

After-Tax Cash Flows Formula

A

Earnings after tax
+ Amortization
+ Depletion
+ Depreciation

= After-Tax Cash Flow

32
Q

Amount REALIZED

A
Prop received (FV)
\+ cash/boot received
- cash/boot paid
\+/- NET reduction of debt
- basis in existing prop
33
Q

Amount RECOGNIZED

A

Lesser of

  • amount realized
  • boot received
34
Q

Amount for BASIS in new prop

A

Basis of existing
+ boot paid
- boot received
+ gain recognized