REG08 Flashcards
With a wash sale what happens to the capital loss that is disallowed (deferred)?
The disallowed loss is added to the basis of the stock repurchased in the wash sale. So, the basis of repurchased shares is (repurchased shares x purchase price) + disallowed loss. The new cost basis of the stock is basis of repurchased shares / shares purchased.
When a nonbusiness bad debt becomes worthless, can you take a loss?
Yes, the loss that results is treated as a short-term capital loss.
What is the amount of loss realized on disposition or worthlessness of Sec. 1244 stock and how would the remaining amount be handled?
Up to $100,000 (if MFJ) of loss for Sec. 1244 stock is treated as an ordinary loss. The remaining is a capital loss. If no capital gains to offset, take the $3K against OI and the remaining loss must be carried forward.
In an installment sale how do you find the total contract price when a mortgage is assumed by buyer?
The total contract price is selling price – mortgage assumed by buyer. Then, the gross profit ratio is Gain / Contract Price.
Payment × GP% = Gain recognized
For determining loss on the sale of property acquired by gift, can the basis exceed the FMV of the property at the date of the gift?
No, the basis may not exceed the FMV of the property at the date of the gift.
What is the basis of property received in exchange for service?
The fair market value of the property received.
What is Sec 1250 gain?
The 25% rate basket consists of unrecaptured Sec. 1250 gain. Unrecaptured Sec. 1250 gain is LT capital gain, not otherwise recaptured as ordinary income, attributed to prior depreciation of real property and is from property held for more than 12 months.
Is nonbusiness bad debt a short-term capital loss?
Yes, nonbusiness bad debt is a ST capital loss, which should be subtracted capital gain.
If an individual realizes a CG on the sale of publicly traded stock and uses the proceeds from the sale within 60 days to purchase stock in a specialized small business investment company (SBIC), what occurs with the gain?
The individual may elect to defer recognition of the gain (Sec. 1044). Gain must be recognized currently to the extent the sales proceeds exceed the cost of the new stock. An annual ceiling of $50,000, or a lifetime ceiling of $500,000 - the excluded gain for prior tax years, of exclusion in any tax year.
Are state and local real property taxes and state and local personal property taxes deductible?
Yes, state and local real property taxes and state and local personal property taxes are deductible. Also allowed is a deduction for state income taxes and a deduction of state and local sales tax in lieu of state income tax. Since these taxes are not allowed as a deduction for AGI, they are itemized deductions, and are reported on Schedule A.
Under section 1202 is there a gain exclusion for the sale or exchange of small business stock and what are the requirements?
Taxpayers may exclude 50% of the gain if held for more than 5 years. Becomes 75% if issued after 02/17/2009 and 100% if issued after 09/27/2010.
How do you compute a realized gain if a gift and gift tax was paid?
Gift Tax Paid x (FMV @ time of gift - Donor’s basis) / (FMV @ time of gift - Exclusion - $15K)
Donor’s Basis + above calc = Basis used to calculate gain/loss.
If have a $5,000 loss on a 5-year-old building that was destroyed in a fire, what is the character of the loss?
If there is a net loss for the year from involuntary conversion of property, including by fire, used in the trade or business or capital assets held long-term for investment or in connection with a trade or business, the loss is treated as an ordinary loss.
When do you use a dual basis for stock received as a gift?
When the FMV of the stock is less than the basis at the date of the gift.
If later transferred for more than FMV but for less than the donor’s basis at the date of the gift, no gain (loss) is recognized.
What is the basis of a gift of property?
Property acquired as a gift generally retains the rollover cost basis it had in the hands of the donor at the time of the gift, unless the FMV is lower than the basis.
