R4 Property 1 (T)

Question 1

Real Property

Answer 1

Land and all items permanently affixed to the land (i.e. buildings, paving, etc.)

Question 2

Personal Property

Answer 2

All property not classified as real property

Question 3

Capital Assets

Answer 3

Include property (real and personal) held by a taxpayer, such as
personal automobile of taxpayer
furniture and fixtures in the home
stocks and securities of all types
Personal or real property not used in business
Copyrights,literary, musical, or artistic compositions that have been purchased

Question 4

Noncapital Assets

Answer 4

Inventory
Depreciable property used in a trade or business (Section 1231, Section 1245, and Section 1250 property)
Accounts and notes receivable
Copyrights, literary, musical, or artistic compositions held by the original artist

Question 5

Amount Realized

Answer 5

Cash received
Assumption of debt by buyer
Property received at fair market value
Services received at fair market value
Less any selling expenses

Question 6

Purchased Property Basis

Answer 6

The cost of such property to the taxpayer

Question 7

Basis for Capital Improvements

Answer 7

Routine maintenance costs are expensed when incurred. However, if the incurred cost is for the betterment or restoration, or new or different use, the cost is capitalized as a new asset separate from the original asset

Question 8

Gifted Property Basis for Gain/Loss Purposes

Answer 8

Property acquired as a gift generally retains the rollover cost basis as it had in the hands of the donor at the time of the gift. Basis is increased by any gift tax paid that is attributable to the net appreciation in the value of the gift

Question 9

Exception to Gifted Property Rollover BAsis

Answer 9

If the fair market value at the date of the gift is lower than the rollover cost basis from the donor, the basis for the donee depends upon the donee’s future selling price of the asset

Question 10

Holding Period for Gifted Property

Answer 10

The recipient of the gift normally assumes the donor’s holding period, unless the FMV of the gift is less than the basis when the gift is donated

Question 11

Inherited Property Basis

Answer 11

Property acquired by bequest or inheritance generally takes as the step-up or step-down to the FMV at the date of the decedent’s death

Question 12

Alternative Valuation Date

Answer 12

If validly elected by the executor, the FMV on the alternative valuation date (the earlier of 6 months later or the date of distribution/sale) may be used to value all of the estate property

Question 13

Holding Period for Inherited Property

Answer 13

Property acquired from a decedent is automatically considered to be long-term property regardless of how long it actually had been held

Question 14

Gains on Property that are Nontaxable

HIDE IT

Answer 14

Homeowner's Exclusion
Involuntary Conversions
Divorce Property Settlement
Exchange of Like-Kind Business/Investment Assets
Installment sale
Treasury and Capital Stock Transactions

Question 15

Homeowner’s Exclusion

Answer 15

The sale of the taxpayer’s principal residence is subject to an exclusion from gross income for gain
$500,000 is available to married couples filing a joint return and certain surviving spouses
$250,000 is available for single, married filing separately, and head of household
There is no age limit, no rollover to another house required, and the exclusion is renewable

Question 16

Involuntary Conversions

Answer 16

Nonrecognition treatment is given to gains realized on involuntary conversion of property (destruction, theft, condemnation) on the rationale that the taxpayer’s reinvestment of the involuntary received proceeds restores him to the position he held prior to the conversion. The amount that is not reinvested is taxable