R3 - Basis and Holding Period of Assets Flashcards
- Purchased Property
Basis = Costs + Improvements Holding period = Purchase dates Adjusted Basis = Basis - Accum Depr REMEMBER!!!! Basis (if I pay tax on it) = FMV Basis (if no tax paid) = NBV
What is real property?
Land and Bldgs
What is personal property?
All others that are not land and bldg.
- Gifted Property
Gifts are non taxable to recipient.
Basis = NBV; because donors rollover costs, except when FMV < NBV (exception applies)
If gift tax is paid, then it is added to Basis.
Gifted Property Exception: Calculating Basis for Gifted Property when FMV is lower than rolled over basis.
Basis determined at the time of sale. For a Gain: Use NBV For a Loss: Use FMV For proceeds in between FMV and NBV: No gain Depreciable Basis: Lower of FMV or NBV.
Gifted Property: Holding Period
General rule: Usually rolls over;except when sold at loss. If sold at loss, holding period starts when gift is received.
Inherited Property
Basis: FMV at date of death; or alternate valuation date
Inherited Property: Alternate Valuation Date
Basis: Earlier of FMV at date of distribution/sale; or max 6mo after death.
Inherited Property: Holding Period
Always LT!!!
Tangible Property: Capitalize or Expense?
Capitalize: - Purchase price/Manufacturing/Construction price - Improvements - Intangible Assets Expense: - Repair and Maintenance - Materials and Supplies
Tangible Property: Holding Period
Starts as of the date the asset is completed.
De Minimis Rule
if written policy; $5,000
if no written policy: $2,500
Safe Harbors
- Maintenance is expenses
- Small TP (RE election): Can expense costs related to an eligible bldg if costs <2% of unadjusted basis or $10K
- Eligible bldg = Bldg w/ unadj basis
