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Coursera - Federal Taxation II > Realized and Recognized Gains/Losses > Flashcards

Realized and Recognized Gains/Losses Flashcards

1
Q

Define Amount Realized?

A

Amount a seller receives when he gives up an asset

what the tax payer gets

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2
Q

Formula for Amount Realized

A 
Cash Received
\+ FMV property received
\+disposition of liability 
-selling expenses
\_\_\_\_\_\_\_\_\_\_\_\_\_\_
Amount Realized
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3
Q

disposition of liabilities

A

someone takes over your liabilities (ie: loan)

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4
Q

Formula for Adjusted Basis

A 
Original Basis
-Accumulated Cost Recovery
\+Capital Improvements
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
Adjusted Basis
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5
Q

Formula for a Realized Gain/Loss

A

Amount Realized (what taxpayer got)
- Adjusted Basis (what taxpayer gave up)
__________________
Realized Gain/Loss

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6
Q

Formula for Recognized Gain/Loss

A 
Realized Gain
-Postponed gain/loss
-tax free gain/loss
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
Recognized gain/loss
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7
Q

What is a methods are used to determine Original Basis? (3)

A
  1. property purchased = cost basis
  2. Bargain purchase
  3. Lump-Sum purchase
  4. gifts
  5. inheritance
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8
Q

What is Goodwill?

A
  1. Lump -sum purchases
  2. goodwill = excess of purchase price over FMV
  3. Goodwill becomes its own intangible asset
  4. Amortized -SL over 180 months
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9
Q

In a lump-sum where purchase price > FMV what is each assets basis?

A

FMV of each property = basis
Purchase price - FMV = Goodwill
Goodwill is amortized SL over 180 mth

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10
Q

In a lump-sum where purchase price < FMV what is each assets basis?

A
  1. FMV/Total FMV = ratio

2. ratio * purchase price of each item = basis for item

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11
Q

What is the original basis for bargain property?

A
  1. FMV - cost basis = included amount
  2. Cost Basis + Included amount = Original Basis
  3. Included amount is also added to buyer’s GI
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12
Q

What is the original basis for a purchased asset?

A

Cost

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13
Q

What is the Cost Recovery Method for Goodwill?

A

Amortized - Straight Line over 180 months

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14
Q

Gift Property: How do you determine Original Basis?

A
  1. Calculate both Gain and Loss Basis
  2. Gain Basis: (Sale Price - Adj Basis)
    Where basis = donor’s basis
  3. Loss Basis: (Sale price - adj basis)
    Where basis is the lesser of :
    donor’s basis OR FMV on date of gift
    - If Gain Basis = gain use gain basis
    - If Loss Basis = loss us loss basis
    - If Loss basis = Gain and Gain basis = Loss then
    wash sale = no gain or loss
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15
Q

Gift Property: What is the holding period?

A

Gain Adjusted Basis = Donor + Donee holding period
Loss Adjusted Basis = Donee on gift date
No Gain/Loss - wash - irrelevant

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16
Q

What is the basis for inherited property?

A

FMV on date of death or 6 months after date of death (many rules)
taxpayer choice

17
Q

What is the holding period for inherited property?

A

Long term for everything

18
Q

What is the exception for basis on inherited property?

A

Death Bed Gifts.

Basis = original owners basis

19
Q

How are personal gains and losses recognized?

A

Gains = taxes

Losses are generally not deductible

20
Q

Can personal causality and theft losses be deducted?

A
  1. (20108-2022) if it occurred in a federally declared disaster area - itemized deduction
  2. casualty theft or loss can offset casualty theft gain
21
Q

Disallowed Losses for Related Parties rule

A

Family members > 50% ownership interest
Corporation-shareholder > 50%ownership interest
Partnership-partner > 50% ownership interest

22
Q

Does a like-kind exchange have both realized and recognized gain/loss?

A

Realized gain/loss at time of event

Recognized gain/loss is deferred

23
Q

Is a Like-Kind Exchange taxable?

A

no

24
Q

What are the 5 requirements for a Like-Kind Exchange?

A
  1. It must be an exchange NOT a sale
  2. An asset must be traded and an asset must be received
  3. Exchange must be the same asset class
  4. Exchange can be like-king for on party but not the other
  5. Exchange must meet timing requirements
25
Q

Like-Kind exchange: What are the requirements in regard to the type of asset? (4)

A
  1. must be same asset class
  2. 2018 and after must be realty property for realty property
  3. US property for US property: Foreign property for Foreign property
  4. no personalty assets
26
Q

Like-Kind Exchange: What are the two timing requirements?

A
  1. replacement property must be identified within 45 days of giving up your property
  2. you must receive property within 180 days of giving up your property
27
Q

Like-Kind Exchange: If you meet all the requirements is it mandatory that you treat the event as non-taxable?

A

yes

28
Q

Like-Kind Exchange: What is Boot?

A

Non-LK property given in addition to the LK property:

  1. cash
  2. property that is not like kind
  3. assumption of liability ( take over a loan)
29
Q

Like-Kind Exchange: How does Boot affect a like-kind exchange?

A
  1. does not destroy exchange
  2. receipt triggers recognition of gain/loss
  3. giving boot does NOT trigger recognition of gain/loss
30
Q

Like-Kind Exchange: If a Boot results in a realized loss do you recognize the loss?

A

no

31
Q

Like-Kind Exchange: What is the holding period for LK exchanges?

A
  1. LK property is carry over - basis of property received is equal to basis of property you gave
  2. Boot - FMV on date of exchange
32
Q

Like-Kind Exchange with Boot: What is the formula for the Realized Gain by taxpayer:

A

Amount Realized (what you got)
- Adjusted basis of land you gave (what you gave up)
___________________________
Realized Gain

33
Q

Like-Kind Exchange with Boot: What is the formula for calculating taxpayer’s Recognized Gain?

A

Lesser of :

  1. Realized Gain OR
  2. Boot received
34
Q

Like-Kind Exchange with Boot: What is the formula for calculating the new basis for the land the taxpayer received?

A 
Basis in LK property given up
\+Adj Basis Boot given up
\+ Recognized Gain
- FMV Boot received
- Loss Recognized
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
New Basis of Land received
35
Q

How are non-taxable transactions Gains and Losses handled?

A

They are deferred. They are temporarily non-taxable

36
Q

What are two important categories of non-taxable exchanges?

A
  1. Like Kind exchanges

2. Involuntary conversions

Coursera - Federal Taxation II (2 decks)

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