Property taxation Flashcards
Property taxation
5-Year Property:
7-Year Property:
5-Year Property: Computers, autos, trucks, machinery, and equipment
7-Year Property: Furniture and fixtures
Half-Year Convention
Half-Year Convention:
One-half year’s depreciation in year of acquisition and one-half year’s depreciation in year of disposal
Sec 179 limit: May elect to expense up to the limit for business-use new or used personal (not real) property per return (particularly subject to tinkering by Congress)
Year Maximum 2019 $1,000,000
Phase-out Threshold $2,500,000
Year
Cannot result in net operating loss (NOL)
Real Property Categories
- Residential Rental:
- Non-residential: Straight-
Real Property Categories
- Residential Rental: Straight-line over 27½ years
- Non-residential: Straight-line over 39 years
Real property
Mid-Month Convention:
Mid-Month Convention: One-half month’s depreciation in month of acquisition and one-half month’s depreciation in month of disposal
NOT Capital Assets (MR CIA)
M Machinery and equipment used in business R Real estate used in business C Copyrights – in hands of original artist I Inventory A Accounts/notes receivable
Section 1231 Assets:
Section 1231 Assets: Depreciable property and real estate used in business that were held more than one year before being sold
Section 1245:
Section 1250:
Section 1245:personal property
Section 1250:real property
Intangible assets amortization
180 months
Capital loss
Individual:
Corp:
Capital loss
Individual:Deduct up to $3,000 loss on business-use or investment property in the current year and carry forward the remaining indefinitely
No losses allowed on personal-use property
Corp: (capital losses only offset capital gains) Carry back 3 years and forward 5 years
Gift Donee’s basis:
1. basisFMV
Gift Donee’s basis:
1. basisFMV
magic hands!
in between>No gain/loss
Inheritances
Donee’s basis:FMV of
Donee’s basis:FMV of
- date of death
- if AVD is chosen, then use FMV 6 months after date of death
- If AVD is chosen and property is distributed within 6 months, then use FMV on date of distribution
Like kind exchange
Personal to personal,
real estate to real estate
basis of old asset
boot paid
(boot received)
taxable gain recognized (financial gain)
A:
Building FMV 500,000
Mortgage 100,000
Basis 300,000
B:
Building FMV 400,000
Basis 250,000
FMV of building received by A $400,000 Debt relief (mortgage relief) 100,000 Total consideration $500,000 Basis of the old asset (300,000) A's gain indicated $200,000
Gain recognized is the lower of indicated gain ($200,000) or boot received ($100,000). Thus, the recognized (taxable) gain is $100,000.
A:
Building FMV 500,000
Mortgage 100,000
Basis 300,000
B:
Building FMV 400,000
Basis 250,000
Basis of old asset $300,000 Boot paid 0
Boot received (debt relief) (100,000)
Gain taxed 100,000
A’s basis in new asset $300,000
related party (family members, 50% > shareholder/partner)transaction
Gift basis rule is applied!
Involuntary conversions
Gain deferred, if replacement property is purchased by 12/31 of third year that the gain is realized
Stock Dividends:
Stock Dividends: Generally not taxable, unless cash option
Estate Taxes
1.Transfer tax(once)
Due 9 months after death, 9-month extension available
Estate Taxes
2. Income tax (annually)
Form 1041, U.S. Income Tax Return for Estates and Trusts
income earned from a going concern
Gross Estate
Fair market value of all world-wide property
Life insurance proceeds
Gifts must be present interest
Incomplete gifts or gifts of future interest do not qualify for exclusion (14,000USD)
Doesn’t have to deduct Y1 dep exp from
MACRS basis when to calculate Y2 dep
Gift tax is applied to
the FMV of the gift of the date of transfer.
but the basis of gift is carryover from donor!
