SU # 6 - Property Transactions

Question 1

6.1 - Basis

Donor & Donee Basis for Gifts:

Identify the basis used for calculating gains and losses of gift property

Answer 1

• Gain - transfer basis is used (donee’s basis = donor’s basis)
• Loss - lower of donor’s AB or property FMV

Question 2

6.1 - Basis

Gift Tax:

What is the formula to calculate gift tax

Answer 2

((FMV @ time of gift - Donor’s basis) / (FMV @ time of gift - Annual exclusion)) * Gift tax paid

OR

(Appreciation / Taxable gift) * Gift tax paid

Question 3

6.1 - Basis

Gift Tax:

What is the annual exclusion for gift taxes?

Answer 3

$ 14,000

Question 4

6.1 - Basis

Gift Tax:

Identify the formula to calculate new basis for gifts

Answer 4

Donor’s adjusted basis + Gift tax = New Basis

Question 5

6.1 - Basis

Uniform Capitalization Rules:

The Uniform Capitalization Rules of Code Section 263A apply to retailers whose average gross receipts for the preceding 3 years exceed what amount?

Answer 5

$ 10,000,000

Question 6

6.2 - Depreciation & Amortization

Recovery Periods:

Identify the recovery periods that use the 200% declining balance

Answer 6

3, 5, 7, and 10 year recovery periods

Question 7

6.2 - Depreciation & Amortization

Recovery Periods:

What is the declining balance percentage for 15 and 20-year properties?

Answer 7

• 150% declining balance

Question 8

6.2 - Depreciation & Amortization

Depletion:

Calculate depletion deduction

Answer 8

(Adjusted basis in mineral property / Estimated mineral units available @ year’s start) * mineral units sold during year

Question 9

6.2 - Depreciation & Amortization

MACRS Depreciation Methods:

Calculate the 5 methods of depreciation under the MACRS methods

Answer 9

• Straight line
• 150% declining balance
• 200% declining balance
• Units of production method
• Operating days method

Question 10

6.2 - Depreciation & Amortization

MACRS Depreciation Method:

Calculate S/L method of depreciation

Answer 10

Annual allowable amount = ((depreciable base - salvage value) / useful life))

Question 11

6.2 - Depreciation & Amortization

MACRS Depreciation Method:

Calculate allowable depreciation using 150% declining balance

Answer 11

Adjusted basis * (150% / useful life)

Question 12

6.2 - Depreciation & Amortization

MACRS Depreciation Method:

Calculate allowable depreciation using the 200% declining balance method

Answer 12

Adjusted basis * (200% / useful life)

Question 13

6.2 - Depreciation & Amortization

MACRS Depreciation Method:

Calculate allowable depreciation using the Units of Production method

Answer 13

(Basis - Salvage Value) * (# units produced during tax year / estimated total units asset will produce)

Question 14

6.2 - Depreciation & Amortization

MACRS Depreciation Method:

Calculate the amount of allowable depreciation using the Allowable Days Method of depreciation

Answer 14

(Basis - Salvage Value) * (# days used during tax year / estimated total days asset can be used)

Question 15

6.2 - Depreciation & Amortization

Mid-Quarter Convention:

How do you calculate the mid-quarter convention for 1st-year depreciation?

Answer 15

Full year amount * % based on quarter asset placed in service

Question 16

6.2 - Depreciation & Amortization

Mid-Quarter Convention:

What is the 1st quarter depreciation percentage for mid-quarter convention?

Answer 16

87.5 %

Question 17

6.2 - Depreciation & Amortization

Mid-Quarter Convention:

What is the 2nd quarter depreciation percentage for mid-quarter convention?

Answer 17

62.5 %

Question 18

6.2 - Depreciation & Amortization

Mid-Quarter Convention:

What is the 3rd quarter depreciation percentage for mid-quarter convention?

Answer 18

37.5 %

Question 19

6.2 - Depreciation & Amortization

Mid-Quarter Convention:

What is the 4th quarter depreciation percentage for mid-quarter convention?

Answer 19

12.5 %

Question 20

6.2 - Depreciation & Amortization

Identify common 5-year property for MACRS depreciation

Answer 20

• computers
• office machinery (copier, etc.)
• cars
• trucks
• research & experimental equipment

Question 21

6.3 - Capital Gains & Losses

Long-Term Capital Gain:

Identify long-term capital gain rates

Answer 21

• 0%
• 15%
• 20%
• 25%
• 28%

Question 22

6.3 - Capital Gains & Losses

Long-Term Capital Gain:

True or False: 0, 15 and 20% baskets are based on the taxpayers’ marginal tax rate

Answer 22

True

Question 23

6.3 - Capital Gains & Losses

Long-Term Capital Gain:

When is the 0% LTCG rate applied?

Answer 23

• 0% – applied if taxpayer’s marginal tax rate is in 10% or 15% bracket

Question 24

6.3 - Capital Gains & Losses

Long-Term Capital Gain:

When is the 15% LTCG rate applied?

Answer 24

• 15% rate applied if taxpayer’s marginal tax rate is in any other bracket except for top 39.6%

Question 25

6.3 - Capital Gains & Losses

Long-Term Capital Gain:

When is the 20% LTCG rate applied?

Answer 25

• 20% rate applies if taxpayer’s marginal rate is 39.6%

Question 26

6.3 - Capital Gains & Losses

Long-Term Capital Gain:

When is the 25% LTCG rate applied?

Answer 26

• basket applied to unrecaptured Section 1250 gains
  
  • Section 1250 – depreciable real property held > 12 months

Question 27

6.3 - Capital Gains & Losses

Market Discount Bond:

Calculate taxable accrued market discount

Answer 27

Market Discount * (# days security held / # days from acquisition to maturity)