REG 5 Flashcards
A business truck is Sec. 1245 property and a gain on its disposition is subject to recapture as ordinary income to the extent of all depreciation previously deducted. Since $21,360 of depreciation had been deducted, all $6,360 of gain is classified as ordinary income.
A business truck is Sec. 1245 property and a gain on its disposition is subject to recapture as ordinary income to the extent of all depreciation previously deducted. Since $21,360 of depreciation had been deducted, all $6,360 of gain is classified as ordinary income.
For realty depreciation, you always use the mid month form of depreciation.
Also remember, Realty for residential use is depreciated at 27.5 years and Realty for nonresidential use is depreciated at 39 years.
For realty depreciation, you always use the mid month form of depreciation.
Also remember, Realty for residential use is depreciated at 27.5 years and Realty for nonresidential use is depreciated at 39 years.
The MACRS five-year property classification includes autos and taxis, light and heavy general-purpose trucks, calculators, copiers, computers, and peripheral equipment. The MACRS seven-year property classification includes office furniture, fixtures, and equipment, as well as agricultural machinery and equipment.
The MACRS five-year property classification includes autos and taxis, light and heavy general-purpose trucks, calculators, copiers, computers, and peripheral equipment. The MACRS seven-year property classification includes office furniture, fixtures, and equipment, as well as agricultural machinery and equipment.
A shareholder’s basis for stock of an S corporation is increased by the pass-through of all income items (including tax-exempt income) and is decreased by distributions that are excluded from the shareholder’s gross income.
A shareholder’s basis for stock of an S corporation is increased by the pass-through of all income items (including tax-exempt income) and is decreased by distributions that are excluded from the shareholder’s gross income.
To be classified as a personal holding company, a corporation must meet both a “stock ownership test” and an “income test.” The “stock ownership test” requires that more than 50% of the stock must be owned (directly or indirectly) by five or fewer individuals.
To be classified as a personal holding company, a corporation must meet both a “stock ownership test” and an “income test.” The “stock ownership test” requires that more than 50% of the stock must be owned (directly or indirectly) by five or fewer individuals.
Implied authority is authority that can be reasonably implied from actual authority and from the conduct of the principal. In a general partnership, the general partners usually have authority to buy and sell goods, receive money, and pay debts of the partnership
Implied authority is authority that can be reasonably implied from actual authority and from the conduct of the principal. In a general partnership, the general partners usually have authority to buy and sell goods, receive money, and pay debts of the partnership
The realized gain must be recognized to the extent of the cash boot received.
The realized gain must be recognized to the extent of the cash boot received.
The shareholders basis in the stock received from the corporation is:
Basis of all property transferred to Corp
+ Gain recognized by the shareholder
- Boot received by shareholder
- Liability’s assumed by Corp
The shareholders basis in the stock received from the corporation is:
Basis of all property transferred to Corp
+ Gain recognized by the shareholder
- Boot received by shareholder
- Liability’s assumed by Corp
The CORPORATIONs basis in the property received is:
Shareholders basis in the prop
+ Gain recognized by the shareholder
The CORPORATIONs basis in the property received is:
Shareholders basis in the prop
+ Gain recognized by the shareholder
When a shareholder makes a contribution to the capital of a corporation, no gain or loss is recognized to the shareholder, the corporation has a transferred (carryover) basis for the property, and the shareholder’s original stock basis is increased by the adjusted basis of the additional property contributed.
When a shareholder makes a contribution to the capital of a corporation, no gain or loss is recognized to the shareholder, the corporation has a transferred (carryover) basis for the property, and the shareholder’s original stock basis is increased by the adjusted basis of the additional property contributed.
No gain or loss is recognized if property is transferred to a corporation solely in exchange for stock, if immediately after the transfer, the transferor is in control of the corporation.
No gain or loss is recognized if property is transferred to a corporation solely in exchange for stock, if immediately after the transfer, the transferor is in control of the corporation.
No gain or loss is recognized by a corporation on the receipt of money or other property in exchange for its stock (including treasury stock). The excess of selling price over cost is treated as an addition to paid-in capital.
No gain or loss is recognized by a corporation on the receipt of money or other property in exchange for its stock (including treasury stock). The excess of selling price over cost is treated as an addition to paid-in capital.
Example of a Sale of Section 1245 Property
Here is an example that may help clear the fog. A business owns a $100 widget and takes $75 of depreciation. The widget’s adjusted tax basis is its $100 cost minus $75 of depreciation, or $25. The business sells the widget for $150. The gain is the $150 sale price minus the $25 adjusted tax basis, or $125. Of that $125, $75 is section 1245 gain taxed at ordinary income rates and and $50 is section 1231 gain taxed at capital gains rates. If the business sells the $100 widget for $20, you have a loss of $20 sale price minus $25 adjusted tax basis, or $5. Since there is $0 gain, Section 1245 does not apply and the $5 loss is a section 1231 loss that is ordinary.
Example of a Sale of Section 1245 Property
Here is an example that may help clear the fog. A business owns a $100 widget and takes $75 of depreciation. The widget’s adjusted tax basis is its $100 cost minus $75 of depreciation, or $25. The business sells the widget for $150. The gain is the $150 sale price minus the $25 adjusted tax basis, or $125. Of that $125, $75 is section 1245 gain taxed at ordinary income rates and and $50 is section 1231 gain taxed at capital gains rates. If the business sells the $100 widget for $20, you have a loss of $20 sale price minus $25 adjusted tax basis, or $5. Since there is $0 gain, Section 1245 does not apply and the $5 loss is a section 1231 loss that is ordinary.
Beginning in 2018, only real property exchanged for real property qualifies under the like-kind exchange rules.
Beginning in 2018, only real property exchanged for real property qualifies under the like-kind exchange rules.
An exchange of services for property or services is sometimes called bartering. A taxpayer must include in income the amount of cash and the fair market value of property or services received in exchange for the performance of services.
An exchange of services for property or services is sometimes called bartering. A taxpayer must include in income the amount of cash and the fair market value of property or services received in exchange for the performance of services.
