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Ethics and Responsibility in Tax Practice > Property Transactions > Flashcards

Property Transactions Flashcards

1
Q

What is the difference between real and personal property and give an example of each

A

1) Real property ( realty) - anything that is attached to the land, the building, trees
2) Personal property - property that is not real, aka: movable

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2
Q

What is severance?

A

Real to Personal Conversion

ex. A tree it cut into firewood

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3
Q

What is attachment?

A

Personal to Real

ex. AC is installed in a house

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4
Q

Which of the following are not capital assets?

A
  1. Inventory
  2. Depreciable property used in a trade or business
  3. Accounts/Notes Recievable
  4. Copyright in the hands of the creator
  5. U.S. government publications
  6. Certain derivative instruments
  7. hedges
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5
Q

What are 1231 Assets?

A

Gain: Capital Treatment
Loss: Ordinary Loss
BECFML
Building, equipment, Conversion of depreciable property, Farming, Mineral , Land

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6
Q

What is 1245 property

A

Personal Property used in trade or business

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7
Q

What is 1250 property?

A

sale of real property at a gain

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8
Q

How do you calculate adjusted basis?

A

Original Basis + Capital Additions - Capital Recoveries(depreciation/depletion

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9
Q

What are the 3 different ways to calculate basis?

A
  1. Standard purchase: cost
  2. Bargain Purchase: FMV of bargain purchase
  3. Inherited property : FMV at the date of death or alternative method
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10
Q

What are some common 5 year depreciable property?

A

automobiles, trucks, computers, office machinery

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11
Q

What are some commmon 7 year depreciable property?

A

heavy trucks, office furnitures, and fixtures

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12
Q

How do you find the amount of gain to be recaptured as income?

A

1) Find adjusted basis ( Basis +-depreciations/recoveries)
2) Sale Price - Adjusted Basis
3) find the lower of gain or depreciation

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13
Q

Can you take losses on sale, exchange, or use of personal assets?

A

NOPE

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14
Q

What are some tax free exchanges?

A
  1. Real estate like kind exchange

2. like kind exchanges

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15
Q

If there is gain on the exchange of property?

A

Gain is recognized as the lesser of gain or boot, any unrecognized gain is postponed

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16
Q

Which things dont qualify for tax free exchange or like kind exchange?

A
  1. property held primarily for sale
  2. securities
  3. Real property
  4. interest in partnership
17
Q

Which items are included in tax free exchange

A
  1. Exchange of stock in the same corporation

2. Transfer of property within a controlled corporation (80%)

18
Q

What is the limit on deduction of casualty loss?

A

10% of AGI

19
Q

How do you find the basis in a like kind exchange?

A

1) Find Gain (of the first property) 2) Basis + Gain - Boot

20
Q

How much can individuals exclude on the sale of a personal residence?

A

250K
and 500K for filed jointly
(residence must be occuppied and owned for 2 out of 5 years)

21
Q

Are losses from Wash sales recognized?

A

Nope, they are postponed

22
Q

According to section 1244, how much can be deducted for worthless stock?

A

50,000

and 100k for MFJ

23
Q

How do you calculate amount realized of real estate?

A

Gross Selling Price - Selling Expense

24
Q

How much can an individual deduct for a net capital loss?

A

3000

25
Q

What happens if there is a loss from the sale of property between related parties?

A

The loss is disallowed

26
Q

According to IRC 267, what is the special rule for sales to a related party that is unpaid at the end of the year?

A

When a cash basis seller sell to an accrual based buyer

27
Q

What are related parties defined as?

A
  1. brothers, sisters, ancestors
  2. corporations 50% ownership
  3. two corporations that are members of a controlled group
    4
28
Q

What is constructive ownership?

A
  1. family member
  2. partners of the taxpayer
  3. proportionate of any stock owned by an entity ( trust, partnership, estate, corp)
29
Q

Give me some facts about gift tax returns

A
  1. Any gift of future interest must be reported on gift tax return
  2. filed on Form 709, calendar year basis
  3. Gift over 14k to charity do not need gift tax return
30
Q

What is the gift tax formula?

A

1) - Deductions
2) + Taxable gains from prior
3) X unified tax rate
4) - Gift tax from prior year
5) - applicable credit

31
Q

What is the lifetime exemption amount for gifts?

A

5490000

32
Q

What are some things that are deductible from gross estate?

A
  1. funeral expenses
  2. expenses occured in the adminstration of the decedent estate
  3. debts of the decedent
  4. casaulty and theft
  5. state death taxes

Ethics and Responsibility in Tax Practice (10 decks)

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