REG09 Flashcards
What is Sec 1250 Property?
Section 1250 property includes depreciable real property acquired after 1986. NOT Land, dams, or irrigation systems.
How do you calculate the gain on a repossession of real property that was sold on the installment method?
Section 1038(b) provides that gain is recognized to the extent the payments received prior to the repossession exceed the gain on the property reported in periods prior to the repossession. Limited to the total gain realized on the sale of the property - the gain recognized in prior periods. LESSER of (Payments received prior to repossession – Recognized gain) and (Gain realized – Recognized).
Can expenses be deducted in computing the amount of gain or loss realized, offset against cash payments received in determining gain to be recognized, or be included in the basis of the property received?
Yes, the IRS has ruled that exchange expenses may be deducted in computing the amount of gain or loss realized, offset against cash payments received in determining gain to be recognized, or included in the basis of the property received
How do you calculate the character of gain that results from goodwill?
Goodwill is not a capital asset a realized gain is treated as depreciable Sec. 1231 property.
Gain from the disposition of a Sec. 197 intangible is subject to recapture under Sec. 1245 and amortization is subject to ordinary income treatment under Sec. 1245.
If an insurance company pays for the lost profits during rebuilding would that be taxable?
Yes, the lost profits during rebuilding would be taxable whether received from customers or insurance proceeds, as they represent business income.
If transactions result in a net Sec. 1231 loss, how are they treated?
Both are treated as ordinary gains and losses.
If it was a net capital gain, both are treated as LT capital gain or loss.
What are the limitations for contributions to private operating foundations, that are not a 50% charity?
Limited to 30% of the taxpayer’s AGI. But contributions of LT capital gain property are limited to 20% of AGI. The total charitable contribution limitation equal to $25,000 still applies.
Is the gain on the sale of investment property a capital gain?
The gain on the sale of investment property is normally capital gain, but Sec. 1239 provides that the gain on sale of property between related persons will be treated as ordinary income if the property is depreciable in the hands of the transferee.
Where is Sec 199A Deduction taken?
The Sec. 199A deduction is taken at the top of page 2 of Form 1040, not on Schedule C or business returns; thus, it does not reduce self-employment income.
What is amount realized?
The amount realized is the sum of the money received and the FMV of other property received.
Is a personal residence considered other property or a capital asset?
Personal-use property, such as a residence, is a capital asset.
What kind of property are AR and Inventory considered?
Other Property.
Does acquired goodwill, meet the definition Sec. 1231 property?
Yes, because it is amortizable, it is “depreciable” business property. It is Sec. 1231 property because it is depreciable property used in a trade or business and held more than 1 year.
BUT Internally generated goodwill is a capital asset.
What is the statute of limitations on an action by a purchaser of securities relying on the Securities Act of 1933?
It is 1 year after the false statements or omissions of material fact were discovered or should have been discovered. The latest the suit may be brought is within 3 years after the security was first offered to the public
How much are individuals allowed to deduct for interest paid during the tax year on any qualified education loan?
The maximum amount that may be deducted is $2,500.
