Property Transactions Flashcards
Is cost basis the sum of capitalized acquisition costs?
Yes, initial basis in purchased property is the cost of acquiring it. Only capital costs are included. Common capitalized costs include the purchase price, major improvements, closing costs, and other miscellaneous costs
Costs for construction of real or tangible personal property to be used in trade or business are capitalized?
Yes, costs for construction of real or tangible personal property to be used in trade or business are capitalized. Capitalize all costs necessary to prepare it for its intended use, both direct and most allocable indirect costs, e.g., for permits, materials, and equipment rent. Construction period interest and taxes must be capitalized as part of building cost.
Cost basis includes the book value of property given up?
No, cost basis includes the fair market value (FMV) of property given up. If it is not determinable with reasonable certainty, use FMV of property received. Capital acquisition expenditures may be made by cash, by cash equivalent, in property, with liability, or by services.
Basis in inherited property is the FMV on the date of death with no exceptions?
No, basis in inherited property is the FMV on the date of death or 6 months after if the executor elects the alternate valuation date for the estate tax return.
Adjusted basis is the original cost of an asset increased or decreased to reflect fair-market value?
No, initial basis is adjusted consistent with tax relevant events not increased or decreased to solely reflect FMV.
The basis of stock acquired in a nontaxable distribution is allocated a portion of the basis of the stock upon which the distribution was made?
Yes, the basis of stock acquired in a nontaxable distribution is allocated a portion of the basis of the stock upon which the distribution was made. If the FMV of the stock rights is less than 15% of the FMV of the stock upon which it was issued, the rights have a zero basis (unless an election is made to allocate basis).
Are real estate taxes capitalized?
No, they are expensed.
Are attorney fees and title insurance included in the cost of the property?
Yes, because they are necessary expenses incurred in the acquisition of the property.
Are warehousing costs capitalized under the Uniform Capitalization Rules of Code Sec. 263A?
Yes, storage of an asset prior to its intended use would qualify as a cost incurred to bring it to its full use and should be capitalized under UNICAP.
The basis of property received in exchange for service is determined by what?
The FMV of the property received.
Fred Berk bought a plot of land with a cash payment of $40,000 and a $50,000 mortgage. In addition, Berk paid $200 for a title insurance policy. Berk’s basis in this land is?
$90,200.
What is the difference between inherited and gifted property in regards to basis?
Property received by inheritance (bequeathed) has a basis equal to the FMV on the date of death or FMV 6 months after if the executor elects the alternate valuation date for the estate tax return.The basis of property acquired by gift is usually the donor’s adjusted basis, increased by any gift tax attributable to appreciation.
Will a stock split reduce a per share basis?
Yes, it does reduce a per share basis.
How do gain/loss calculations work when a transferee has a dual basis from receiving property with a basis greater than FMV on the date the gift is received?
The basis of property received by gift is the donor’s basis (transferred or carryover basis). If the fair market value of the property at the time of the gift is lower, however, the basis for purposes of determining a loss is the fair market value. The basis used to determine a gain will be the donor’s basis/transferred basis.
When asset acquisition of personal property occurs mostly at the end of the year, the mid-quarter convention applies?
Yes, the mid-quarter convention applies when asset acquisition is bunched at the end of the year. Each asset is treated as placed in service at the midpoint of the quarter in which it actually was placed in service.