Deck 17 Flashcards Preview

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Flashcards in Deck 17 Deck (21):
1

Involuntary conversion

Generally no gain recognized; reinvestment for personal property must be within 2 years; reinvestment for real property must be within 3 years; gain recognized only for boot

2

Losses that are nondeductible "WRaP"

W: wash sales; R: related party transactions; and P: personal loss

3

Tax rate for net long-term capital gains for individuals:

Max is 20%; can use 15% or even 0%

4

Tax rate for net short-term capital gains for individuals:

Treat as ordinary income

5

Carry back and carryforward rules for the different types of losses:

Operating losses: offset income, carry back 2 and carry forward 20; individual capital losses: $3000 to offset income, no carry back, carry forward forever; corporate capital losses: no offset of income, carry back 3 and carry forward 5

6

MACRS Depreciation Rules for property:

Salvage value is ignored, use either half-year convention or mid-quarter convention; includes machinery and equipment

7

Number of years under MACRS for residential rental property

27.5 years; includes apartments and duplex rentals

8

Number of years under MACRS for nonresidential rental property

39 years; office buildings and warehouses

9

MACRS Depreciation Rules for Real Estate:

Residential rental property (27.5 years); Nonresidential real property (39 years); use mid month convention; includes building

10

Section 179 expense limit

$25,000 of new or used personal property; reduced by amount that exceeds $200,000

11

Percentage depletion deduction limit

50% of taxable income from the well or mine

12

Business organization and start-up costs

$5000 + remainder over 180 months

13

Net section 1231 losses are treated as:

Ordinary losses

14

Section 1231 (capital) gain:

Recognized gain is the amount above accumulated depreciation, if any; if none above accumulated depreciation then treat as ordinary gain

15

Tangible personal property that is not inventory must be:

Capitalized

16

De minimis rule

Annual expense election only if the policy is written, under a certain dollar amount, and/or property with an economic useful life of 12 months or less

17

What is the maximum amount for the de minimis rule if a company has an applicable financial statement?

$5,000; if no applicable financial statement then max amount is $500

18

Recapture rule for section 1245 gain is:

The lessor of: depreciation take, or gain recognized

19

When does a partnership terminate?

Terminates for income tax purposes when 50% or more of its interests change hands within 12 months.

20

Partnership's basis =

Adjusted basis + cash contribution - share of partnership liabilities

21

When a partner's share of partnership liabilities increases, the partner's basis in the partnership:

Increases by his share of the increase