R4 Flashcards
What is a capital Asset?
Property (Real and personal) not used in the course of business.
What are non capital assets?
Inventory, Held for Customers, AR, and Depreciable personal property and real estate used in a trade of business.
What is the adjusted basis in property purchased, received as a gift, or inherited?
Purchased: Cost
Gift: Rollover, exception Lower FMV at date of Gift.
Inherit: True up to FMV.
What is the holding period for property?
Gift: Assume donor’s holding period.
Inherit: Long-term regardless.
What is the alternate valuation date?
In estates, the FMV on AVD (Earlier of six months later or date of distribution) may be used to value all of the estate property.
What is the Alternate Valuation Date available?
If its use lowers the entire gross estate and estate tax (although individual assets may go up or down during the period)
What is the Alternate Valuation Date valued?
FMV at earlier of:
Distribution date; or
Alternate Valuation Date (earlier of 6 months after death or date of distribution/sale)
How can a taxpayer hide gains on sale of property?
H = Homeowners Exclusion (Residence for 2 of 5 years) I = Involuntary Conversion D = Divorce Property Settlement E = Exchange of like-kind business/Investment Assets (Lesser of realized gain or boot received)
I = Installment Sale (GP/Sales Price) X Cash Collection T = Treasury and Capital Stock Transactions
What is the amount realized in an exchange of like kind?
Amount Realized - Adjusted Basis of property given up + Cash Boot - Cash Boot Paid Out
What is the gain recognized on Exchange of Like Kind Items for individuals?
Lesser of Realized Gain or boot received. Realized Loss Never Recognized.
When is a realized loss recognized?
Never.
What is the Gain or Loss Deferred?
Gain Realized - Gain Recognized
What is the individual’s Basis in property received during like kind exchange?
FV of Property Received - Deferred Gain + Deferred Loss
How are losses on property nondeductible?
W = Wash Sale Losses R = Related Party Losses A = And P = Personal Losses
What is a Wash Sale?
Security is sold and repurchased within 30 days. Taxpayer cannot use “substituted basis.” Must pay capital gains tax and add the disallowed loss to the basis of repurchased security.
What is the basis in a loss sale?
The disallowed loss is added to the basis in the new transaction.
Gift tax rules apply to Related Party Transactions?
True.
Are losses from related party transactions allowed?
No.
How are individual Net Capital Losses carried forward?
Carried forward forever, maintains character as long-term or short-term.
How are individual net capital losses netted?
ST Capital Losses offset ST Gains, LT Gains in descending order (28%, 25%, 20%, 15%).
How are corporate net capital losses treated?
Offset capital gains only. Back 3, Forward 5 as ST Capital Losses.
What are the general rules for MACRS depreciation?
Salvage value is ignored. Half year Convention unless Mid Quarter (>40% of Depreciable PP in Q4)
How is real estate depreciated?
Residential: 27.5 YR Straight Line
Non Residential: 39 Year Straight Line
Mid Month for the month property is placed in service and disposed of.
What property is depreciated over 5 year?
Autos, Typewriters, Computers.
What property is depreciated over 7 years?
Office Furniture, Equipment.
What is the Section 179 limit?
25K reduced dollar for dollar by the amount of property placed in service exceeding 200K.
What is Section 1231 Depreciation?
Gives LT Capital Gain Treatment. Losses treated as ordinary losses.
What is a Section 1245 Gain?
Recapture all Accumulated Depreciation:
- Lesser of gain recognized or all accumulated depreciation is recaptured as ordinary income.
- Remaining gain is a section 1231 gain.
Section 1250 gains?
Recaptures only portion of depreciation taken on real property in excess of straight line.
When is a partnership contribution subject to taxation?
Services Rendered
Property Subject to an Excess Liability
What is the basis of a contributing partner’s interest?
Cash Property @NBV Assumed by other partners Services @ FMV Liabilities assumed by incoming partner
What is a partnerships Basis for Contributed Property?
NBV + Gain Recognized by incoming partner
Debt Assumed
What makes up a partner’s account?
Capital Account
+ Income %
- Losses %
=Ending Capital Account
What is a partnership Basis?
Basis: Capital Account + Partner’s Share of Liabilities
When is a partnership’s 1065 Tax Return due?
April 15
What are a partner’s tax losses limited to?
Limited to:
Tax Basis: Adjusted Basis
At-Risk Amount: Does not include certain nonrecourse, no economic risk to that partner.
Passive Loss limitations: Limits ordinary losses against ordinary income.
How are partnership losses carried forward?
Carried forward not back.
