Tax - Property Transactions Flashcards
Cost of property + Purchase expenses + Debt assumed + Back taxes and interest paid = Basis. Note: taxes and interest related to time when a taxpayer did not own the property are not deductible - they are added to basis.
Property transactions
Sold at a gain: use donor’s basis
Sold at a loss: use lesser of donor’s basis or FMV at time of distribution
Sold in between donor’s basis and FMV: No gain or loss
Property transactions
FMV at date of death or alternate valuation date (6 months later)
If alternate date is elected by property is sold before 6 month window; use FMV at date of death.
Property inherited is LTCG property regardless of how long it is held by the recipient.
Property transactions
Holding period of new stock received from a dividend takes on the holding period of the original stock
Property transactions
Real for real or personal for personal business property only
US property only
Property transactions
Cash received + unlike property received + liability passed to other party
Property transactions
DO NOT subtract the boot paid amount from the cash received
Ignore the boot paid amount from the mortgage completely
Property transactions
Occurs when you receive money for a property involuntarily converted
There is no gain if you reinvest the proceeds completely
If proceeds not completely reinvested; gain is LESSER of realized gain or amount not reinvested.
Property transactions
Must live there 2 out of 5 years
Loss on sale of home is NOT deductible
Property transactions
30 Day rule applies
Disallowed loss adds to basis of new stock
New stock takes on date of acquisition of old stock
Property transactions
Ancestors; siblings; spouse; descendants; corporation or partnership where you’re a 50% shareholder
Seller cannot take a loss on sale to a related party; but gain is always recognized.
Related party gets to use the disallowed loss when they sell.
Related party’s holding period begins when they acquire the property.
In-laws are NOT related parties.
Property transactions
capital losses only offset capital gains
Carryback 3 years - if you elect NOT to carryback; you lost the option in the future
Carry forward 5 years - only as STCL
Property transactions
Inventory; Business interest; Accounts Receivable; Covenant not to compete
Goodwill IS a capital asset
Property transactions
Net all STCG and STCL
Net all LTCG and LTCL
Add together
Deduct $3;000
Property transactions
$3;000 per year. Unused is carried forward and taken $3;000 each year.
No carryback is allowed.
Property transactions
