R2 Flashcards
Bonus Dep
If purchased from a related party cannot use bonus
New or Used bus prop w/Dep life of 20 yrs or less (can use)
Bonus dep is 60% of of the Dep Basis - if combining MACRS dep use the remaining amount (after the 60%) to Dep for MACRS 1/2 yr Conven Table
Sec 179 Deduction
$3,050,000
$1,220,000 Max that businesses can deduct
If FMV is lower than Donor’s Basis
Then It depends on Selling Price:
IF SP is greater than both the FMV & Donor’s Cost Basis - USE Donor’s Cost Basis
IF SP less than both - USE FMV at day of gift
IF THIS HAPPENS use the day of gift as holding period
IF SP is between FMV and the Donor’s Cost Basis - USE SP
BUT Holding Period is N/A - holding period does NOT apply
IF FMV is higher than Donor’s Basis
Use Donor’s Basis
Item has been appreciated
S-Corp
Recognizing Net Capital Loss
The deduction is limited to lesser of $3k or Net Capital Loss
MACRS Rules for BLDG
Is depreciable using:
39-yrs
Straight-Line
Mid-Month Acquisition
Treats as though it was acquired mid-month
Ex: If it was purchased and placed in service in August then you would Multiply (4.5 months/12 months)
WASH SALE
Occurs when a taxpayer sells stock at a loss and invests in same stock 30 days before or after sale
Capital Assets
Prop you own for personal use or investment purposes
Items Excluded:
Prop used in a trade or business
Inv or AR from business operations
A nonbusiness bad debt must be totally worthless to be deductible.
A nonbusiness bad debt is treated as a short-term capital loss in the year the debt becomes totally worthless.
WASH SALE
Wash-Sale disallowance only applies to losses, NOT gains
Realized = Sale Proceeds - Basis
Recognized = Realized - Deferred
Purch / Sold X New Basis = Disallowed Loss
A short sale of stock
Results in a capital asset sale.
Holding period is based on the date the short sale is executed
NOT closing date of when the stock was delivered
Holding period is based date the short sale was executed
A personal-use asset is a capital asset
A gain on sale of Personal-Use Asset is Taxable Gain
A loss on sale of a Personal-Use Asset is Nondeductible personal loss
De Minimis Safe Harbor
Company must have an accounting policy to expense amounts for tangible personal property
If they have AFS (Applicable Financial Stmts) :
They can expense Items costing $5k
If they do NOT have AFS (Applicable Financial Stmts):
They can expense items costing up to $2,500 each
MACRS
Salvage Value is ignored for purposes of computing the deduction
Municipal Bond
Interest Income from a Municipal Bond is NOT Taxable
Gain on the sale of the bonds is Taxable
AVD - Alternate Valuation Date
Is earlier of the date of Distribution OR Sale OR 3 months after the date of DEATH
For Schedule - C
Business Expenses Include
Work Uniforms (employer and employees)
Subscriptions for periodicals
Continuing Education
BUT NOT Custodial Fees for Self-Employed Retirement Accounts
In business conversion for personal property to business use
The basis will be the cost of prop NOT FMV
Use FMV when determining the tax basis for a loss on the sale of property
MACRS
SL
USE 27.5 YEAR IF IT IS RESIDENTIAL PROPERTY AND USE THE .5 FOR THE MONTH
MACRS
SL
USE 39 YEARS IF IT IS NON-RESIDENTIAL PROPERTY AND USE THE .5 FOR THE MONTH
EXAMPLE IF IT IS JULY 29 USE 5.5
USE MID-QUARTER IF PERSONAL PROP IS PLACED INTO SERVICE THE LAST QUARTER OF THE YEAR
MUST MORE THAN 40%
Also use half-year in 1st year and year to dispose
