Chapter 6 Flashcards
(29 cards)
What are some common capitalized costs?
brokerage commissions pre-purchase taxes sales tax excise tax title transfer tax title insurance recording fees attorney fees document review, prep appraisal fees freight installation testing off site storage
When do uniform capitalization rules not apply?
when property is acquired for resale and past 3 years annual receipts do not exceed $10 million
Is a sale of restricted stock to an employee treated as gross income?
To the extent that FMV exceeds purchase price. Included in gross income in the first unrestricted taxable year
What is the basis for depreciation for property converted into business use?
Lesser of FMV or AB on conversion date.
How is the basis computed per asset for a lump sum purchase?
Basis = (FMV of asset/FMV of all purchased) x lump sum purchase price
How is a donee’s basis in property acquired by gift determined?
Gift tax paid x [(FMV at time of gift - donor’s basis) / (FMV at time of gift - $13,000)]
How is basis determined with inherited property?
FMV at date of death
How is basis of stock determined that is acquired in a nontaxable distribution if new shares and old share ARE identical?
Old basis divided among new total of shares
How is basis of stock determined that is acquired in a nontaxable distribution if new shares and old share ARE NOT identical?
basis is allocated in proportion to the FMV of the original stock and the distribution as of the date of distribution
What is the basis of depreciation for property converted into business use?
lesser of the FMV of the property at the conversion date or the adjusted basis at conversion
What types of property are not capital assets?
- inventory
- real or depreciable property used in t or b (limo)
- A/R acquired in ordinary t or b
- copyrights and artistic compositions
- certain US govt pubs acquired reduced cost
What is Net Capital Gain?
Excess of net LTCG (LT gain - LT loss) over STCL. Note: STCG is not included.
What is capital gain net income?
Net of short and long term gains and losses
If a long-term basket has a net loss, what does the loss offset first?
First net gain for the highest L/T basket, and then next highest and so on
How is a L/T loss carryover used?
First used to offset any L/T gain in 28% basket, then 25% basket and so on
How is a S/T loss carryover used?
First used to offset any L/T gain in 28% basket, then 25% basket and so on
How does a corporation treat excess capital losses?
Must carry back 3 years and forward 5 years and characterize as STCL
If property was bought 2/15/11, when is the first day of L/T treatment?
2/16/12
How is a
1) business bad debt treated?
2) non-business bad debt treated?
1) ordinary loss
2) STCL
How are capitalized amounts net yet amortized upon disposition treated?
Capital loss
What is a wash sale?
When substantially the same securities are purchased within 30 days before of after being sold at a loss
What happens to a wash sale disallowed loss?
add the loss to the basis of the repurchased stock
How is the gain on sale treated for a market discount bond?
Ordinary income to the extent the market discount could have accrued as interest
Market Discount x (# days security held / # day from acquisition to maturity)
How is Sec. 1244 small business stock treated?
Up to $50,000 single ($100,000 MFJ) of loss treated as ordinary loss
