REG - M2 - Property Taxation

Question 1

Basis of GIFT
Holding period of GIFT

Answer 1

Gift from donor to donee
*Donee’s basis = SAME as DONOR
COULD include gift tax paid on appreciation of gift
*Holding period = donor’s period
UNLESS basis is FMV, then holding period is date of gift

Question 2

Basis of GIFT for determining GAIN or LOSS

Answer 2

GAIN - use DONOR basis
LOSS - use FMV at date of gift
IF Sales Price is IN BETWEEN Donor and FMV, then NO GAIN or LOSS is recognized

Question 3

Basis of GIFTED property for depreciation

Answer 3

Basis is the LOWER of:
*Donor’s adjusted basis at date of gift
*FMV at the date of the gift

Question 4

Basis of INHERITED property
Holding period of INHERITED property

Answer 4

Basis is the LOWER of:
*FMV at date of death
OR
*FMV at alternate valuation date (if elected, which is)
*six months after date of death
*date of distribution/sale IF earlier than 6 months
Holding period is ALWAYS LONG TERM

Question 5

Treatment for Gains/Losses

Answer 5

Individuals = Max -$3000 per year deduction against all income
the rest is carried forward
Short term < 1 yr, Long term >1 yr
C Corp = cannot deduct against ordinary income
losses can offset against gains
carryback 3 years or forward 5 years then they expire

Question 6

Nondeductible losses

Answer 6

WRAP
Wash sale loss
Related party transactions
And
Personal loss

Question 7

MACRS Recovery methods

Answer 7

Modified Accelerated Cost Recovery System
3 yr to 10yr = 200% declining balance
15yr and 20yr: 150% declining balance
NO salvage value
Taxpayer can choose straight line in lieu of declining balance

Question 8

Half Year, Mid Quarter, Mid Month

Answer 8

Same method must be used for all personal property acquired in same year in same property class
Half Year - Six months depreciation taken in year acquired and year disposed; Applies in MACRS and straight-line
Mid Quarter - replaces Half Year if 40% of personal prop is put in service during last 3 months of tax year; assumes in service in mid-point of quarter
Mid Month - used for MACRS on real property
27.5 years residential rental real property
39 year nonresidential real property
put in service in middle of month of acquisition and disposed in middle of month

Question 9

What is Section 179 Expense Deduction

Answer 9

Can deduct up to $1.22m of acq cost of personal prop used in trade/business
Limits
*Reduced $1 for each $1 of property put in service over $3.05m
*Deduction limited to taxable income (before this deduction)

Question 10

What is Bonus depreciation?

Answer 10

Depreciation expense is 60% of the cost of property put in service during the year
Then balance is expensed through MACRS
Qualified prop = personal prop and improvements w life up to 20 yrs
AFTER Section 179 expense (if claimed) and BEFORE MACRS expense

Question 11

Bonus Depreciation other items

Answer 11

Assets converted from Personal to Business Use NOT eligible
Assets acquired from a Related Party are NOT eligible
Assets that were received as a GIFT are NOT eligible
Assets that were INHERITED are NOT eligible

Question 12

Criminal activity accounting

Answer 12

report income but do NOT deduct fraudulent expenses