Property Transactions Flashcards
What are ordinary assets?
- Depreciable property held in a trade/business for a year or less (includes AR, NR, and Inventory)
- Includes copyrights and musical, artistic, and literary works if held by person who created work
- Composer can elect to have musical work treated as capital asset
What are Section 1231 assets?
-Depreciable property in a trade/business FOR MORE than a year
How do you calculate amount realized?
Cash received
+FMV of property or services received
+Liabilities assumed by buyer
-Selling expenses
Are losses from personal assets deductible?
NO! w/ exception for casualty losses
What is the basis for gifts?
- Gain basis: AB of donor
- Loss basis: Lower of AB of donor or FMV at date of gift
- Basis is increased for portion of gift tax paid by donor due to appreciation in property
How do you calculate the adjustment to basis for gift tax paid due to appreciation in property?
Unrealized appreciation/(FMV at date of gift - annual exclusion) x Gift tax paid
If property sold by donee for amount in between gain and loss basis, how do you calculate gain/loss?
-NO GAIN/LOSS recognized in this situation
What is the holding period for gifted property?
- Gain basis: Include holding period of donor
- Loss basis: Begins on date of gift
What is basis and holding period of inherited property?
- FMV at date of death or on alternate valuation date if selected by executor as valuation date
- If sold before alternate valuation date (if elected) use FMV on date of distribution
- Holding period is always long term
What is the basis of property converted from personal to investment/business use?
-Same rules as gifted property
What are capital assets?
- Anything not ordinary or 1231
- Includes personal use and investment use
- Goodwill of a corporation is a capital asset
