REG mod 36

Question 1

What is the carryback and carryforward rule related to an individual’s net capital losses?

Answer 1

Net capital losses may not be carried back and may be carried forward indefinitely.

Question 2

Describe the treatment of Section 1245 losses.

Answer 2

There are no Section 1245 losses.

Question 3

Recognized gain in a like-kind exchange is the lesser of ______ or ______.

Answer 3

Recognized gain is the lesser of the realized gain or the boot received.

Question 4

Are wash sale losses deductible?

Answer 4

Wash sale losses are not deductible.

Question 5

What is the carryback and carryforward rule related to a C corporation’s net capital losses?

Answer 5

Net capital losses may be carried back 3 years and carried forward 5 years.

Question 6

Describe section 1245 recapture.

Answer 6

Section 1245 recapture requires a taxpayer to recognize, as ordinary income, all gain that is caused by:
Post-1961 Depreciation of disposed section 1245 property
Post-1980 recovery deductions on the disposition of section 1245 recovery property

Question 7

When do the wash sale rules apply?

Answer 7

This applies to securities that are sold at a loss and within thirty days (before or after) the taxpayer repurchases substantially the same stock.

Question 8

What is ‘boot’ in a like-kind exchange?

Answer 8

Assets that are given or received in the transaction that are not like-kind. For example, in a like-kind transaction involving land, the receipt or payment of cash is considered to be boot.

Question 9

Describe the characteristics of a Like-Kind Exchange.

Answer 9

Generally not taxed in the current period
Applies only to business or investment property
Business property may be exchanged for investment property and vice versa.
Real Property may only be exchanged for real property
Personal Property may only be excha

Question 10

What type of income is recognized on a Section 1245 gain?

Answer 10

Ordinary income

Question 11

What is an involuntary transaction?

Answer 11

A transaction that takes place when property is received for property that has been destroyed. An example would be if a taxpayer’s house burnt down, and the taxpayer received proceeds from the insurance company.

Question 12

Provide an example of ‘boot’ in a like-kind exchange.

Answer 12

Cash received / paid in a like-kind exchange
Other property that is not like-kind that is received / paid in a like-kind exchange
Liability, such a mortgage that is given to the other party

Question 13

What is the basis of property that was received as a gift and sold at gain?

Answer 13

The basis for a gain is the basis of the donor.

Question 14

What is the basis of a gift that is subsequently sold at a loss?

Answer 14

It is the lesser of the donor’s basis or Fair Market Value on the date of the gift.

Question 15

Does exchanging real property in the United States for real property in a foreign country qualify for treatment of a Like-Kind Exchange?

Answer 15

No, the like-kind exchange rules do not apply to foreign real property

Question 16

What is the basis of property received in a Like-Kind Exchange?

Answer 16

The basis of the property received is:
Basis of property given
\+Gain (Loss) Recognized
\+ Basis of boot given
-FMV of boot Received