R2 - Property Taxation

Question 1

RULE: BASIS OF PROPERTY

Answer 1

If it is received as a gift depends on whether the selling price of the property is more or less than the basis for gain or loss

If prop is sold as a gain the basis to the donee is the same as it would be in the hands of the donor or the FV of the property at the date of the gift, WHICHEVER IS LOWER.

In some cases, there is neither a gain nor loss on the sale of the gift bc the selling price is less than the basis for gain and more than the basis for loss

Question 2

De Minimis Safe Harbor

Answer 2

WHAT DETERMINES? Allows for a business that have a policy in place to immediately expense low-cost personal property items for financial accounting purposes

HOW MUCH? Allowable amount for each items is determined is if the business has an Applicable Financial Statement (AFS), which means an audited financial statement

WHO? A taxpayer with an AFS can deduct the amount paid up to $5,000
For those who do not have an AFS can deduct $2,500 per item
If the cost is more than the allowable amount the entire cost of the item must be capitalized

Question 3

AVD = Alternate Valuation Date

Answer 3

If the AVD is elected, a bene’s basis is the FMV on the AVD.
An exception to this is if the asset is sold or distributed prior to the AVD.

Then the basis is the FMV on the date of sale or distribution.

Question 4

RULE FOR THE BASIS OF AN ASSET ACQUIRED BY GIFT

Answer 4

The basis is a carryover of the donor’s basis
UNLESS
FMV at date of gift is below the carryover basis

Question 5

Under WASH SALE RULES

Answer 5

NONE of the loss is recognized and it is all deferred

Question 6

MACRS

Answer 6

Modified Accelerated Cost Recovery System

1/2 yr Convention Rules unless purchase is more than 40% of personal prop in the last QTR of yr
THEN
use mid-QTR Convention

Question 7

for MACRS

Personal Property 5 YR CLASS

Answer 7

VEHICLES
COMPUTERS
COPIERS

Question 8

for MACRS

Personal Property 7 YR CLASS

Answer 8

FURNITURE
MACHINERY
EQUIPMENT

Question 9

for MACRS

Personal Property 15 YR CLASS

Answer 9

QUALIFIED IMPROVEMENTS TO INTERIOR OF NON-RESIDENTIAL BLDG

Question 10

INTANGIBLE ASSETS

Answer 10

Can be amortized over 180 months (15 years)
Beginning with the month of Acquisition

Question 11

Research EXP

Answer 11

Are amortized over 60 month period

Question 12

BUSINESS ORGS & START UP COSTS

Answer 12

Allowed to exp $5,000 for each the rest is amortized for over 180 months AKA 15 years

Reduced dollar for dollar as total costs for each exceeds $50,000

Question 13

Corporations Capital Losses

Answer 13

Capital Losses are carried back 3 years and forward 5 years