REG Module 2 Flashcards
What is the rules regarding gifts?
Use the “rollover” basis I.e. (Donees basis = donor’s basis). The basis from the donor rolls over to the donee.
EXCEPTION: If the FMV of the gifted property is LOWER than the rollover basis.
So if the sales price is greater that the donor’s basis then it will be a gain. If it’s less than the market value then loss. If it’s in between those two amounts, then NO gain OR Loss.
What is the rules regarding property acquired by bequest or inheritance?
Generally step up or step down approach to FMV. The executor can elect the FMV on the alternative valuation date. Which is the earlier of 1. 6 months or 2. The date of distribution/sale.
The alternate valuation date is ONLY available if its use lowers the entire gross estate and the estate tax.
Is there a $3000 deduction for capital losses for businesses/corporations?
NO! The $3000 is only allowed for individuals. Not corporations. A net loss can be carried back three years, or forward 5 to offset capital gains.
What losses are disallowed?
“WRAP” charges are disallowed.
W - Wash sale losses -Security (stock or bond) is sold for a loss and is repurchased within 30 days before or after the sale date. Loss is excluded
R- Related party losses
A - And
P - Personal losses
What is the MACRS depreciation deduction?
The MACRS rule provides a 39 year life, straight line depreciation and a “mid-month” acquisition convention that treats the property as acquired in the middle of the month, regardless of actual date of acquisition. Salvage value is ignored for purposes of computing the MACRS depreciation.
The half year convention provides that one-half the first years depreciation is allowed in the year in which the property is placed in service during the year, and a half years depreciation is allowed for the year in which the property is disposed of.
MACRS Five Year Property?
Automobiles, light trucks, computers, typewriters, copiers, duplicating equipment, and other such items.
Mid-quarter convention under MACRS
When a taxpayer places more than 40% of its property (other than certain qualifying real property) into service in the last qtr of the taxable year, the corporation must use the mid-qtr convention for MACRS depreciation purposes.
The different conventions for personal property, and real property.
Personal: Half year convention/mid quarter convention
Real: Mid month convention: Residential= 27.5 years. Nonresidential=39 years.
Basis for intangibles such as goodwill, licenses, franchises, trademarks, covenants, etc.
15 years.
Social Security tax withheld an amount greater than the maximum for a particular year
The excess as a credit against income tax if that was correctly withheld by two or more employers.
If itemized deduction is greater than standard deduction then what?
The excess is included in gross income.
