EA Part 2-Passkey 9-10 Flashcards
Section 1245 property includes any property that is or has been subject to depreciation or amortization and is:
- Personal property,
- Other tangible property (other than a building/its components):
a) Used in manufacturing, production, extraction or furnishing transportation, communications, electrical energy, gas, water, or sewage disposal services,
b) A research facility used for the activities above
c) A facility used in (production) for the bulk storage of fungible commodities, - Real property (other than ppt with recapture deductions)
- A single purpose agricultural or horticultural structure, or
- A storage facility (other than a building/its structural components) used for the distribution of petroleum.
The basis of the property you receive, in a partially nontaxable exchange, is the same as the basis of the property you gave up, with the following adjustments.
*Additional money paid, including exchange expenses,
+FMV of any non-like kind property transferred to other party,
+Net liabilities assumed by the taxpayer, and
+Any gain recognized on the exchange.
- Boot received (money, FMV of non-like kind property, net liabilities other party assumes)
- Any loss recognized on the exchange.
Section 197 are
intangibles;
such as copyrights and patents, which must be amortized not depreciated
MACRS is the depreciation method generally used for most
tangible property;
such as machinery, buildings, & autos
Placed-in-service date is when ___ begins.
depreciation
Item must be ready & available for use.
An asset cannot be depreciated below its __
salvage (or scrap) value. Therefore basis for deprec. is cost minus salvage value.
Three common depreciation methods:
1) straight-line
2) double-declining balance
3) unit-of-production method (eg., # of miles driven or units produced)
To properly report the disposition of an asset, a TP must first determine whether it’s a…
- capital asset
- noncapital asset or
- Section 1231
Listed property includes
cars, other vehicles for transport, property use for entertainment, recreation or amusement, certain computers
Capital asset
- personal-use assets
- collectibles and
- investment ppt such as stocks, bonds, other securities
Section 1231 Assets are ___
- business (noncapital) assets that have been held > 1 year
- certain business & investment ppt disposed of in involuntary conversions
- real ppt for business use
- business-use ppt involuntarily converted by theft, casualty, condemnation
If TP has a net loss from all Section 1231 transactions, the loss is treated as __
ordinary loss.
Noncapital assets
- inventory
- accounts receivable
- other assets used in a trade or business
- residential rental property
- used to produce royalties
Section 1231 assets include depreciable business property such as __
- buildings,
- machinery
- timber and unharvested crops
- livestock
- leaseholds.
Sections 1231 assets can also include nondepreciable ___
real property (such as land that is purchased for business use)
If TP has a net gain from all Section 1231 transactions, the gain is generally treated as __
capital gain (except for depreciation recapture, which is taxed as ordinary income).
Sections 1231 assets can also include intangibles like ___
a patent, copyright or other intangible asset used in business.
Types of buildings that qualify for Section 1231 treatment:
- hotels
- office buildings
- warehouses
- residential apt complexes
Sections 1231 assets can also include any asset held for more than 1 year that is ___
used for the production of income and has been involuntarily converted due to theft, casualty or condemnation.
Depreciation recapture is required when ___
a business sells previously depreciated or amortized property at a gain. Portion of gain attributable to deprec. is treated as ordinary income.
A fungible good or asset is ____
is essentially interchangeable with other goods or assets of the same type.
Ex: dollar bill; no difference between one dollar and another.
Section 1250 property generally consists of ___
- buildings (& structural components)
- other inherently permanent structures
- land improvements of general use and purpose.
Form 4797
Sales of Business Property
Examples of Section 1250 property
- residential rental ppt
- factory bldgs
- office bldgs
