R3 - Property Taxation Flashcards
Basis for Purchased Property
Basis = cost + capitaI improvements
- Cost includes all amts to purchase & place into svc
- Reduce basis by accumulated depreciation
- HP= purchase date
Basis for Gifted Property
Basis = rollover cost (GR} + any gift tax paid
-Exception: lower FMV at date of gift, basis dependent
on future SP of asset: 3 situations
1. SP>roll over : gain is dif bw SP & roll over basis
2. SP
Basis for Gifted Property - Depreciation
GR: basis for depreciation is the lesser of:
- donor’s adjusted basis at date of gift
- FMV at date of the gift
Basis of Inherited Property
Basis = FMV at date of death (GR}
- Alternative Valuation Date: earlier of
1. date of distribution/sale
2. six months after death - HP: Automatically LT property regardless of length held
Noncapital Assets –> Ordinary Treatment
- Property included in inventory or held for sale
- Depreciable personal property & real estate used in bus
- A/R, N/R arising from sales or svcs in TP’s bus
- Cop yri ghts, li terary, musical held by original artist
- Treasury stock
Basis Calculation of G/L
Amount Realized
(Adj basis of asset sold)
= Gain or Loss
** Amount realized includes: cash received, assumption of debt by buyer, FMV property received, FMV services received, & subtract out an selling exp’s
LKE
-Only real estate for investment or business use qualifies for LK
-Personal property does not qualify
• TP must identify LK replacement proprety w/i 45 days of giving up their property. LK property must be received by earlier of:
1. 180 days after TP transfers property in LK exchange, or
2. the due date of the TP’s income tax return
LKE - Gain/Basis Rules when gain deferred
- If property other than property qualifying for LKE treatment i s received (cash, COD, non qualifying property FMV) gain recog.
- Gain recognized is lesser of:
1. Realized gain
2. Boot received - Basis = FMV of LK property received • deferred gain + def loss
Amount realized (cash, coo, FMV property) (subtract cash i f u paid)
< Ad j basis>
=Realized G/l
Wash Sale Losses - Nondeductible - WRAP
-When security (bond or stock) is sold for a loss& repurchased w/ i 30 days before OR after sale date. (Dealers excluded)
Basis of repo security= New purchase price+ disallowed loss
Real Property vs. Personal Property
- Real: land & all items permanently affixed to the land (bldgs)
- Personal: all items not classified as real (equipment)
Capital Assets
- include property held by TP for in vestment, such as:
1. Personal car of TP
2. Furniture & fixtures in home of TP
3. Stocks & securities of all types (except those held by dealers)
4. Personal property of TP not used in trade or business
5. Land held for personal use, real property not used in business
6. Interest in partnership, GW of a corporation
7. Option held by investor
8. Copyrights, literary, musical that have been purchased
Related Party Transactions
Basis = use gift tax basis/rules. HP starts w new owner
-Family or more than 50% owned business
Net Capital Gains/Losses - C Corp Rules
- No distinction bw ST & LT capital gains for C corps
- Net capital gains are taxed at regular tax rate
- Capital losses can ONLY offset gains,no deductible amt!
- Net capital loss can be CB 3 yrs & CF 5 vrs as a ST capital loss
Section 1250 Recapture - C Corp
- For c corps, Sec 291 applies to Sec 1250 assets
- Under 291, the amount of recapture as ordinary income is equal to 20% the lesser of:
1. the recognized gain, or
2. accumulated SL depreciation on the asset - Any remaining gain is Sec 1231 Gain
Section 1231 Assets - Include 1245, 1250, land
- Sec 1231 l: ordinary L fully ded against ordinary inc
- sec 1231 G: capital gain treatment
- Sec 1231 5 year look back rule!
