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REG > Property Transactions > Flashcards

Property Transactions Flashcards

1
Q

TAX BASIS IN A PROPERTY Calculation

A

Cost of property
+Purchase expenses
+Debt assumed
+Back taxes and interest paid

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2
Q

What is the treatment on back taxes and interest paid on property transactions?

A

Back taxes and interest paid by taxpayer are not deductible for assessments on time taxpayer did not own the property - they only add to property’s basis.

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3
Q

What is the tax basis for gifted property?

A

USE BASIS, NOT FMV

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4
Q

What is the tax basis for gifted property sold at a gain?

A

Use donor’s basis

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5
Q

What is the tax basis for gifted property sold at a loss?

A

Use lesser of donor’s basis or FMV at time of distribution

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6
Q

What is the tax basis for gifted property sold in-between donor’s basis and FMV?

A

No Gain or Loss

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7
Q

What is the tax treatment of ESTATE PROPERTY INHERITED?

A

USE FMV, NOT BASIS

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8
Q

Which date should be used for estate property inherited?

A

Use FMV at death or Alternate Valuation Date (6 mo. later)

o If Alt. date is chosen but sold before 6 mo. window, use FMV at date sold

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9
Q

How is Property inherited is recognized?

A

LTCG property regardless of how long you hold it after receipt

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10
Q

What is the STOCK DIVIDEND HOLDING PERIOD?

A

Holding period of new stock received from a dividend takes on the holding period of the original stock

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11
Q

SALE OF AN ASSET GAIN CALCULATION

A

Selling Price (cash received + liability relieved)

Gain

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12
Q

What is a LIKE-KIND EXCHANGE?

A
  1. Real for real or personal for personal business property only
  2. US property only
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13
Q

What is INVOLUNTARY CONVERSION?

A
  1. Occurs when you receive money for a property involuntarily converted
  2. There is no gain if you reinvest the proceeds completely
  3. If not…
    Example:
    Received $24,000 Reinvested $21,000
    Basis Not Reinvested $3,000
    Realized Gain $4,000
    Realized Gain $4,000 vs. Not Reinvested $3,000
    Take the lesser… Recognized Gain = $3,000
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14
Q

SALE ON HOME (PERSONAL RESIDENCE)

A
  1. Must live there 2 out of 5 years

2. Loss on sale of home is NOT deductible

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15
Q

WASH SALE

A
  1. 30-Day rule applies
  2. Disallowed loss adds to basis of new stock
  3. New stock takes on date of acquisition of old stock
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16
Q

What are SALES BETWEEN RELATED PARTIES?

A
  1. Ancestors
  2. Brother/Sister
  3. Spouse
  4. Descendants
  5. Corporation or partnership where you’re a 50% shareholder
  6. Seller cannot take a loss on a sale, but the gain is always recognized
  7. Related party gets to use the disallowed loss when sold
    o Never below zero - i.e. a net loss is not allowed
    o Related party’s holding period begins when they acquire property
    8.In-Laws are not related parties
17
Q

What are the effects of CAPITAL LOSSES (CORPORATIONS)?

A
  1. Capital losses only offset capital gains
  2. Carryback 3 Years
    o If you elect to not carryback when able, you lose the option in the future
  3. Carryforward 5 Years - only as a STCL
18
Q

How is CAPITAL GAIN/LOSS PROPERTY CLASSIFICATION?

A
  1. Inventory is NOT a capital asset
  2. Business property is NOT a capital asset
  3. A/R is NOT a capital asset
  4. Covenant not to compete is NOT a capital asset (and your basis is zero)
  5. Goodwill (internally generated) IS a capital asset
19
Q

What are CAPITAL GAINS AND LOSSES (NON-CORPORATIONS)?

A
  1. Net all STCG and STCL
  2. Net all LTCG and LTCL
    Example:
    Net STCG $10,000
    Net LTCL
    Net LTCL
    Deduct $3,000
    LTCL Carryforward
    Note: a Carryforward always maintains its character
20
Q

CAPITAL LOSSES FOR INDIVIDUALS?

A
  1. Individuals can offset $3,000 of ordinary income with a $3,000 capital loss
  2. Unused capital losses don’t get deducted on decedent’s final return, but unused passive losses do
  3. No Carryback for Individuals allowed
21
Q

Treatment of PERSONAL PROPERTY USED IN BUSINESS?

A

Any G/L on business property held

22
Q

What are 1231 PROPERTY?

A 
Real or Personal Property held more than a year
o Inventory is never 1231 Property
 Casualty Losses on 1231 Property
o Net the losses
Net Loss = Ordinary Loss
Net Gain = Combine with other 1231 Gains
23
Q

What are 1231 Net Loss?

A

If 1231 Losses > Gains, treat as Ordinary Loss

24
Q

What are 1231 Net Gain?

A

If 1231 Gains > Losses, treat as LTCG

25
Q

What is a 1231 Gain?

A

LTCG

26
Q

What is a 1231 Loss?

A

Ordinary Loss

27
Q

What is 1245 (PERSONAL) DEPRECIATION RECAPTURE?

A

You sell a piece of depreciated machinery at a gain
o Some of gain is treated as ordinary income
Amount of depreciation
Remainder of the gain is a 1231 LTCG

28
Q

Are there any 1245 Losses?

A

No

29
Q

What is a 1245 Gain?

A

Ordinary

30
Q

What is a Casualty Gain?

A

LTCG

31
Q

Are there 1245 Losses?

A

No, N/A

32
Q

What is a Casualty Loss on 1245?

A 
Ordinary
Example:
Sale Price $102,000
Cost of Asset 
Depreciation 
Basis $52,475
Gain 
1245 Ordinary 
1231 LTCG $2,000
33
Q

What is 1250 (REAL) DEPRECIATION RECAPTURE?

A

You sell a building at a gain
There are no 1250 Losses
Individuals: Post-1986 property with gain is 1231 LTCG
If Straight Line depreciation is used, don’t use 1250
o Entire Gain is 1231
Corps: Section 291 requires 20% of depreciation classified as ordinary gain
o Remainder is 1231 LTCG

34
Q

What is DEPRECIATION RECAPTURE?

A 
Sec. 1245 for Personal Property
 Sec. 291 for Corporate Real Estate
Example: Involuntary Conversion
Amount received from involuntary conversion $125,000
Price of replacement building $110,000
Cost of original building $100,000
Depreciation taken 
Basis $86,000
Realized Gain $39,000
Take lesser of realized gain or amount NOT invested
Realized Gain $39,000
vs
Amount NOT invested $15,000
($125,000 - $110,000)
Recognized Gain $15,000
Ordinary Gain $14,000 (from depreciation)
1231 LTCG $1,000
35
Q

Rule for 1231 question on your Exam

A

The amount of depreciation listed represents Ordinary Gain Income

36
Q

What is the rule if any 1231, 1245, 1250 asset is held

A

Gain or Loss is Ordinary

REG (21 decks)

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