R2 - Property Taxation Flashcards
RULE: BASIS OF PROPERTY
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
De Minimis Safe Harbor
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
AVD = Alternate Valuation Date
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.
FMV at the earlier of the date the property is distributed or 6 months after the date of death
Then the basis is the FMV on the date of sale or DISTRIBUTION
RULE FOR THE BASIS OF AN ASSET ACQUIRED BY GIFT
The basis is a carryover of the donor’s basis
UNLESS
FMV at date of gift is below the carryover basis - IT DEPENDS ON SUBSEQUENT SELLING PRICE, IF LOWER THAN FMV THEN BASIS IS FMV, IF FMV IS USED (at the time of gift) then holding period is Short-Term
If selling price of gift is in between Donors basis and FMV at time of gift then NO GAIN OR LOSS is RECOGNIZED then the tax basis is the same as selling price - holding period DOES NOT APPLY.
Under WASH SALE RULES
NONE of the loss is recognized and it is all deferred
MACRS
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
for MACRS
Personal Property 5 YR CLASS
VEHICLES
COMPUTERS
COPIERS
for MACRS
Personal Property 7 YR CLASS
FURNITURE
MACHINERY
EQUIPMENT
for MACRS
Personal Property 15 YR CLASS
QUALIFIED IMPROVEMENTS TO INTERIOR OF NON-RESIDENTIAL BLDG
INTANGIBLE ASSETS
Can be amortized over 180 months (15 years)
Beginning with the month of Acquisition
Intangibles include:
Goodwill
Licenses
Franchises
Trademarks
COVENANTS not to compete
Research EXP
Are amortized over 60 month period
5 YEARS
BUSINESS ORGS & START UP COSTS
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
Corporations Capital Losses
Capital Losses are carried back 3 years and forward 5 years
A personal use asset is a capital asset
So a gain on the sale of a personal-use asset is a taxable capital gain
Basis is the FMV
of date of death
If no mention of the Alternate Valuation Date - AVD
Holding Period will always be Long Term
