R4 Property 3 (T)

Question 1

Nondeductible Losses

WRaP

Answer 1

Wash Sale Loss
Related Party Transaction
and
Personal Loss

Question 2

Wash Sale Loss

Answer 2

Exists when a security (stock or bond) is sold for a loss and is repurchased within 30 days before or after the sale date. The loss is disallowed

Question 3

Related Party Transactions

Answer 3

Sales between related parties are not considered arm’s length. Related parties include
brothers and sisters
husband and wife
lineal descendants (father, son, grandfather)
entities that are more than 50% percent owned by individuals, corporations, trust, and/or partnerships

Question 4

Capital Gains Rule for Related Parties

Answer 4

Capital gains taxes are imposed on all sales of non-depreciable property between all related parties except
Husband and wife
an individual and a 50%+ controlled corporation or partnership

Question 5

Basis of Property in Related Parties Transaction

Answer 5

The basis and related gain or loss of the second buying relative depends on whether the second relative’s resale price is higher, lower, or between the first relative’s basis and the lower selling price to the second relative

Question 6

Holding Period for Related Party Transactions

Answer 6

The holding period starts with the new owner’s period of ownership

Question 7

Personal Loss

Answer 7

No deduction is allowed for the loss on a nonbusiness disposal or loss. An itemized deduction may be available in the category of casualty and theft

Question 8

Section 1231 Assets

Answer 8

Composed principally of depreciable personal property and real property used in the taxpayer’s trade or business and held over 12 months

Question 9

Capital Loss Deduction

Answer 9

Individual taxpayers realizing a net long-term or short-term capital loss may only recognize (deduct) a maximum of $3,000 of the amount realized from other types of gross income

Question 10

Individual Long-Term Capital Gain

Answer 10

Holding period: more than 1 year
Tax rate: 20% is the maximum; 15% if the taxpayer is in the 25, 28, 33, or 35% income brackets; use 0% if taxpayer is in the 10 or 15% tax income bracket

Question 11

Individual Short-Term Capital Gains

Answer 11

Holding period - one year or less

Tax rate - treated as ordinary income

Question 12

Individual Unrecaptured Section 1250 Gain

Answer 12

Any unrecaptured section 1250 gain from depreciation that is not treated as ordinary income is taxed at 25% for taxpayers not in the 10 to 15% income tax bracket