Property Transactions Pillar Topics Flashcards
The modified accelerated cost recovery system (MACRS) is a depreciation method used for tax purposes.
a There is half year convention, mid quarter, mid month, > half year and mid quarter apply to personal property > mid month to real property > half year most of the time, unless mid quarter applies: 40% of personal property being placed into service in the final quarter. > There is 5 year and 7 year for personal property > 27.5 year for residential and 39 year for business real estate. > 5 year - Office computers, new cars > 7 years - Office furniture and fixtures > 27.5 year - residential property > 39 years - Business buildings
Calculating the Basis of Assets Converted to Business Use
Converted Assets basis at date of conversation is the lesser of the original cost basis plus improvements or the FMV.
You then use this tax basis going forward to any gains at the sale of the property
Calculating the Basis of Gifted or Inherited Assets
For gifted property, typically the basis is the adjusted basis from the donor, unless the donee then sells the gift later. At that point, it may be different based on the selling price.
With inherited property, typically the basis is stepped up at the date of death for the beneficiary.
A: Calculating the Basis of Stock Acquired Through a Wash Sale
Wash sales rule apply if there is a loss on a sale and within 30 days before of after there’s a purchase of similar or identical stock.
This can disallow some of the loss or all.
This can also affect the holding period of future purchases, and it can also affect the basis of future purchases and sales.
Calculating the Basis of Intangible Assets, Including Start-Up Costs
$5000 can of start up costs and organizational costs can be immediately deducted each. However, this would be reduced dollar for dollar for everything over $50000, meaning that if you had a total of $55000 or more there would be no immediate deduction.
Intangible assets typically include goodwill, patents, brands, customer lists. they are amortized usually over 180 months (15 years) for tax purposes.
Determine Property Eligible for a Section 179 Deduction
There is a maximum deductible amount, a phase out amount and an income limit for 179. for any amount the phase out these starts reducing the total 179 deduction dollar for dollar.
Not all property qualifies, it has to be business use tangible assets, has to be from an unrelated party.
The deduction is limited by business income.
Calculate Tax Amortization for Intangible Assets
Section 197 is 15 years for intangible.
Typically from acquisition of another business includes things like goodwill, customer lists .
How to calculate charitable contribution deduction of Corporation
The charitable contribution deduction is limited to 10% of taxable income before the dividends-received deduction and the charitable contribution deduction.
For example - 10% ($410,000 income+ $20,000 Dividend) = $43,000. The deduction consists of $40,000 from the current year and $3,000 from the prior year contribution carryover. That leaves a $2,000 carryover from Year 1 to Year 3.
Dividend received dedcution
