R4: Property, Partnership, and Estate and Gift Taxation

Question 1

Corporate and individual capital gain/loss rules.

Answer 1

Individual: limited to $3,000 max deduction in excess of capital losses; no carry back, carry forward indefinitely.
Corporation: no deduction in excess of capital gain, carry back 3, forward 5

Question 2

Partnership initial basis:

Answer 2

Cash
+Property (adjusted basis)

+Services (FMV and taxable to partner)
+% of liabilities (assumed by other partners)
= beginning partnership basis

Question 3

Calculation of existing partnership basis

Answer 3

Beginning capital account
+% of all income (including tax free income)

= ending capital account
+% or RECOURSE liabilities
= YE basis

Question 4

Capital Gain Rules - HIDEIT

Answer 4

H - homeowners exclusion ($250k/$500 MFJ - live in for 2 years in last 5, doesn’t have to be consecutive)
I - involuntary conversions (destruction, theft, etc.- gain to extent you don’t reinvest)
D - divorce property settlement
E - exchange of like/kind assets
I - installment sales (gross profit percentage)
T - treasury and capital stock transactions

Question 5

Capital Loss Rules - WRaP

Answer 5

W - wash sales (30 days +/-)
R - related party transactions
and
P - personal losses (disallowed)

Question 6

Estate/Trust DNI

Answer 6

Estate gross income (including capital gains)

=Adjusted total income
+ Adjusted tax-exempt interest

= DNI

Exclusion - $5,430,000

Question 7

Treatment of built-in gains on date of partnership formation

Answer 7

The difference between the tax basis and the FMV of contributed property at the date of partnership formation is allocated to the contributing partner when property is sold from the partnership

Question 8

Basis formulas (realized, recognized, new basis)

Answer 8

FMV of new + boot received - boot paid - adjusted basis of old = realized gain
Recognized gain = lesser of realized gain or boot received
New basis = adjusted basis of property given up + gain recognized - boot received + boot paid

Question 9

Partner provides services in exchange for interest - how is this transaction treated?

Answer 9

Taxable to partner @ FMV of services OR based on FMV of assets received (in the case of assets held by partnership)

Question 10

Recognized gain on liquidating distribution of partnership interest

Answer 10

Gain is only recognized to extent the cash distribution exceeds partners adjusted basis in partnership

Question 11

A partnership is terminated for income tax purposes when:

Answer 11

1. Either 50% of total interest in capital and profits is sold within 12 months.
2. Or partnership business and financial operations are discontinued.

Question 12

De minimis rules for capitalization

Answer 12

1- capitalization policy must be written (under a certain $ amount or less than 12 month useful life)
2- Co. has applicable financial statement - limited to $5,000
3- Co. does not have applicable financial statement - limited to $500

Question 13

What is income w/ respect to a decedent?

Answer 13

Covers income before taxpayers death but not collected until after death.

Question 14

Standard deduction for estates and trusts & applicable deductions

Answer 14

Standard deduction not allowed & charitable bequests and funeral costs are allowable deductions.

Question 15

Capital assets are:

Answer 15

All property held by a taxpayer except:
1- property normally included in inventory or held for sale to customers
2- depreciable property & real estate used in business
3- accounts/notes receivable in ordinary course of business
4- copyrights, literary, musical or artistic compositions
5- treasury stock

Question 16

1231 Assets are…

Answer 16

Depreciable personal property and real property used in a business and held for over 12 months.

Question 17

MACRS 5 year property includes…

Answer 17

Automobiles, light trucks, computers, typewriters, copiers, duplicating equipment, etc.