Property Transactions Flashcards
What are ordinary assets?
1) Inventory and accounts/notes receivables
2) Depreciable property and realty used in trade/business that have been owned for a year or less
What are Section 1231 Assets?
Depreciable property used in a trade/business and realty that have been owned for more than one year
What are capital Assets?
1) Property held for investment
2) property held for personal use
How do you calculate realized gain or loss on a sale or disposition?
Amount realized - Adjusted basis
How to compute amount realized?
1) Cash received; plus
2) FMV received; plus
3) Liabilities assumed; minus
4) Selling expenses
How to determine adjusted basis?
Equals the cost or other acquisition basis of property;
Plus capital improvements;
Minus depreciation
What is the donee’s basis if property is gifted to a taxpayer?
a. Gain basis = adjusted basis of the donor
b. Loss basis = lower of:
I. FMV at the date of gift
ii. Adjusted basis of the donor
c. Depreciable basis = gain
What are the tax effects of basis for gifts?
1) A gain is recognized only if the done sells property for more than the gain basis
2) A loss is recognized only if the done sells property for less than the loss basis
What is the holding period for gifted property?
1) If the gain basis is used to compute realized gain or loss; the holding period of the property for the done = holding period of the donor
2) loss basis = holding period begins on the date of the gift
How much Net Capital Loss an individual can deduct per year?
$3,000
What is the carryforward period for Net Capital Loss for individuals?
Carried forward indefinitely, can’t be carried back
How is gains and losses treated for Section 1244 stock?
Gain is treated as regular long-term capital gains
Loss is treated as ordinary losses
What is the maximum amount that can be characterized as ordinary for Sec 1244 stock?
Single - $50,000
MFJ - $100,000
How is gains and losses treated for Section 1231 Assets?
Gains treated as LTCG
Loss deductible as ordinary loss
What is the lookback provision for Section 1231 gains and losses?
1) gains offset 1231 losses from preceding 5 years
2) 1231 gain treated as ordinary income to the extent of the losses
3) Recapture rate is 25%
What does section 1245 recapture apply to?
section 1245 property is all depreciable property except buildings
How do you calculate section 1245 recapture?
Is the lesser of gain recognized or all depreciation taken
How does Section 1245 treat gain on property disposed?
As ordinary income to the extent of depreciation; any excess is treated as Section 1231 gain.
How does Section 1245 treat losses on property disposed?
No recapture is required
What does Section 1250 recapture apply to?
Buildings (depreciable real property)
When is Section 1250 recapture apply?
When accelerated depreciation method is used and property is sold for a gain
How does Section 1250 treat gains?
Equal to the excess of accelerated depreciation taken over straight line depreciation as ordinary income. The lower of additional depreciation or recognized gain is ordinary income. The excess in gain is Section 1231 gain
How is gain and losses recognized for like kind exchanges?
Losses are never recognized
Gains is the lesser of:
- realized gain; or
- boot received
How to calculate basis of property after like kind exchange?
Adjusted basis or property given + gain recognized + boot given (cash paid, debt assumed) -boot received (cash received, debt relief)
What are the MACRS years for personalty property?
5 years - computers, delivery truck
7 years - computer desk, office furniture
39 years - buildings
What are the MACRS years for realty property?
mid-month S/L
27.5 years - residential
39 years - non residential
intangible assets amortized over 180 years
mid quarter is used when 40% of the assets is purchased in the last quarter
