R4 - Property Transactions Flashcards
A wash sale exists when:
A security (stock or bond) is sold for a loss and is repurchased within 30 days before or after the sale date.
Capital loss deduction is limited to ____________ per year with the excess carried forward indefinitely.
$3,000
Definition of Real Property:
Real property is land and everything permanently attached to it.
Specific netting procedures for capital gains and losses:
Gains and losses are netted within each tax rate group, creating net short-term and long-term gains or losses by rate group. Resulting short-term and long-term loses then offset short-term and long-term gains (respectively) beginning with the HIGHEST tax rate group and continuing to the lower rates.
Examples of Capital Assets:
Personal automobile, furniture and fixtures, stocks and securities, personal property not used in a trade or business, real property not used in a trade or business, interest in a partnership, goodwill, copyrights, etc.
Like-kind exchange
Nonrecognition treatment (nontaxable) is accorded to a “like-kind” exchange of property used in the trade or business or held for investment (with exception of inventory, stock, securities, partnership interests, and real property in different countries). “Like-kind” means the same type of investment.
In “Like-Kind” exchange remember Realized vs Recognized rules
No boot received, realized is FMV - adjusted bases.
No boot received, recognized is lesser of gain realized or boot received.
“Like-Kind” Exchange - new basis rules
FMV - deferred gain+deferred loss
Deferred gain = Gain realized - gain recognized.
OR
Adjusted basis of property given up+boot paid
OR
Adjusted basis of property given up - loss recognized (or + gain recognized) - Boot received.
Realized loss is never recognized in:
Like-kind exchanges
Installment method (Installment Sale)
Revenue is reported over the period in which the cash payments are received. The amount of cash received is multiplied by the gross profit percentage on the sale to determine the revenue.
Real property (buildings) is subject to the __________ convention under MACRS.
Mid-month.
Only personal property (machinery & equipment) is subject to the half-year and/or mid-quarter conventions.
If more than 40% of depreciable personal property is placed in service in the last quarter of the year, the __________ convention must be used.
Mid-Quarter
Mid-month convention rules:
Straight-line depreciation is computed based upon the number of months the property was in service. One half month is taken in the month the property is PLACED IN SERVICE. One half month is taken for the month in which the property is DISPOSED OF.
Section 1245 pertains to
Personal property (machinery and equipment)
Section 1250 pertains to
Real property
