R4

Question 1

What is a capital Asset?

Answer 1

Property (Real and personal) not used in the course of business.

Question 2

What are non capital assets?

Answer 2

Inventory, Held for Customers, AR, and Depreciable personal property and real estate used in a trade of business.

Question 3

What is the adjusted basis in property purchased, received as a gift, or inherited?

Answer 3

Purchased: Cost
Gift: Rollover, exception Lower FMV at date of Gift.
Inherit: True up to FMV.

Question 4

What is the holding period for property?

Answer 4

Gift: Assume donor’s holding period.
Inherit: Long-term regardless.

Question 5

What is the alternate valuation date?

Answer 5

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.

Question 6

What is the Alternate Valuation Date available?

Answer 6

If its use lowers the entire gross estate and estate tax (although individual assets may go up or down during the period)

Question 7

What is the Alternate Valuation Date valued?

Answer 7

FMV at earlier of:
Distribution date; or
Alternate Valuation Date (earlier of 6 months after death or date of distribution/sale)

Question 8

How can a taxpayer hide gains on sale of property?

Answer 8

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

Question 9

What is the amount realized in an exchange of like kind?

Answer 9

Amount Realized - Adjusted Basis of property given up + Cash Boot - Cash Boot Paid Out

Question 10

What is the gain recognized on Exchange of Like Kind Items for individuals?

Answer 10

Lesser of Realized Gain or boot received. Realized Loss Never Recognized.

Question 11

When is a realized loss recognized?

Answer 11

Never.

Question 12

What is the Gain or Loss Deferred?

Answer 12

Gain Realized - Gain Recognized

Question 13

What is the individual’s Basis in property received during like kind exchange?

Answer 13

FV of Property Received - Deferred Gain + Deferred Loss

Question 14

How are losses on property nondeductible?

Answer 14

W = Wash Sale Losses
R = Related Party Losses
A = And
P = Personal Losses

Question 15

What is a Wash Sale?

Answer 15

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.

Question 16

What is the basis in a loss sale?

Answer 16

The disallowed loss is added to the basis in the new transaction.

Question 17

Gift tax rules apply to Related Party Transactions?

Answer 17

True.

Question 18

Are losses from related party transactions allowed?

Answer 18

No.

Question 19

How are individual Net Capital Losses carried forward?

Answer 19

Carried forward forever, maintains character as long-term or short-term.

Question 20

How are individual net capital losses netted?

Answer 20

ST Capital Losses offset ST Gains, LT Gains in descending order (28%, 25%, 20%, 15%).

Question 21

How are corporate net capital losses treated?

Answer 21

Offset capital gains only. Back 3, Forward 5 as ST Capital Losses.

Question 22

What are the general rules for MACRS depreciation?

Answer 22

Salvage value is ignored. Half year Convention unless Mid Quarter (>40% of Depreciable PP in Q4)

Question 23

How is real estate depreciated?

Answer 23

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.

Question 24

What property is depreciated over 5 year?

Answer 24

Autos, Typewriters, Computers.

Question 25

What property is depreciated over 7 years?

Answer 25

Office Furniture, Equipment.

Question 26

What is the Section 179 limit?

Answer 26

25K reduced dollar for dollar by the amount of property placed in service exceeding 200K.

Question 27

What is Section 1231 Depreciation?

Answer 27

Gives LT Capital Gain Treatment. Losses treated as ordinary losses.

Question 28

What is a Section 1245 Gain?

Answer 28

Recapture all Accumulated Depreciation:

• Lesser of gain recognized or all accumulated depreciation is recaptured as ordinary income.
• Remaining gain is a section 1231 gain.

Question 29

Section 1250 gains?

Answer 29

Recaptures only portion of depreciation taken on real property in excess of straight line.

Question 30

When is a partnership contribution subject to taxation?

Answer 30

Services Rendered

Property Subject to an Excess Liability

Question 31

What is the basis of a contributing partner’s interest?

Answer 31

Cash
Property @NBV
 Assumed by other partners
Services @ FMV
Liabilities assumed by incoming partner

Question 32

What is a partnerships Basis for Contributed Property?

Answer 32

NBV + Gain Recognized by incoming partner

Debt Assumed

Question 33

What makes up a partner’s account?

Answer 33

Capital Account
+ Income %
- Losses %
=Ending Capital Account

Question 34

What is a partnership Basis?

Answer 34

Basis: Capital Account + Partner’s Share of Liabilities

Question 35

When is a partnership’s 1065 Tax Return due?

Answer 35

April 15

Question 36

What are a partner’s tax losses limited to?

Answer 36

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.

Question 37

How are partnership losses carried forward?

Answer 37

Carried forward not back.