REG 2 Flashcards
(31 cards)
Property Gift Basis
Gain basis = adjusted basis of the donor (also used as depreciable basis)
Loss Basis = lower of FMV at date of gift or adjusted basis of the donor
If property is received as a gift, and the property’s FMV on date of gift is used to determine a loss, the donee’s holding period begins when the gift was received
Gift Tax Exemption
If the asset is sold for $ between adjusted basis and FMV at the time of gift, no gain or loss is recognized.
Example: basis $40, FMV : $30 and sold at $36
What is Section 1221 assets
inventory, accounts receivable and depreciable property or real estate used in business.
Capital gain rollforward rules
cannot be rollback to previous years. roll forward indefinitely max $3,000 loss / year
Section 1244
permits a shareholder to deduct an ordinary loss of up to $50,000/100,000 (married) per year
not available if the shareholder sustaining the loss was not the original holder of the stock.
C corporation net capital loss carryback/forward rules
Carryback 3 years, carryforward 5 years
Section 1245 recapture (to ordinary income)
Section 1245 property is all depreciable property other than buildings
lesser of gain recognized or all depreciation taken
ordinary income to the extent depreciation was taken
No recapture if sold at loss
Section 1231
provide capital gain treatment to a net gain generated from transactions involving involuntary conversions and the disposition of business assets.
include realty and depreciable property but exclude capital assets, inventory, accounts receivable, copyrights, and government publications.
Loss is treated as ordinary income
Section 1250 recapture
applies to buildings (depreciable real property)
applies only when accelerated depreciation method is used
does not apply when property is disposed of at a loss..
lower of additional depreciation or recognized gain is ordinary income
The excess gain, if any, is Section 1231 gain.
depreciation rules for realty vs. personalties
200% declining balance or 150% declining balance is used for personalty; straight line is used for realty
Realty - mid-month convention
Personalty - mid-year convention
Section 179 election
to expense a limited amount of tangible personalty if used in a trade activity
Code-Section 1245 property is eligible for the Code-Section 179 election
taxpayers may expense a statutory amount of the cost of property used by the taxpayers in active trade or business. The statutory amount is $1,080,000 for 2022 OR up to the income amount.
the $1,080,000 maximum is reduced dollar for dollar by the cost of qualifying property placed in service during the taxable year that exceeds $2,700,000.
Intangible assets depreciation
180 months (15 years) - month convention
MACRS Building dpereciation
nonresidential property= 39 years, straight line with midmonth covention
residential property = 27.5 years straight line with midmonth covention
Amortization period for a covenant not to compete related to business acquisition
15 years
Like Kind Exchanges
Losses are never recognized
Recognized gain is the lesser of realized gain or boot received
Wash Sales
losses from the sale of securities are not recognized if similar securities are purchased within 30 days of the sale
the basis of the acquired like-kind property reflects the deferred gain resulting from the like-kind exchange, and is equal to the basis of the property transferred increased by the amount of gain recognized , and decreased by the amount of boot received
MACRS for furniture and fixtures
qualify as seven-year property and under MACRS will be depreciated using the 200% declining balance method.
a half-year convention applies to the year of acquisition. However, the mid-quarter convention must be used if more than 40% of all personal property is placed in service during the last quarter of the taxpayer’s taxable year.
Section 291
Sec. 1250 recaptures gain as ordinary income to the extent of “excess” depreciation (i.e., depreciation deducted in excess of straight line). The total gain less any depreciation recapture is Sec. 1231 gain. Sec. 291 requires that the amount of ordinary income on the disposition of Sec. 1250 property by corporations be increased by 20% of the additional amount that would have been ordinary income if the property had instead been Sec. 1245 property.
MACRS depreciation for furniture and fixtures om business
even-year property and under MACRS will be depreciated using the 200% declining balance method.
Normally, a half-year convention applies to the year of acquisition
mid-quarter convention must be used if more than 40% of all personal property is placed in service during the last quarter of the taxpayer’s taxable year.
capital asset definition
The definition of capital assets includes personal-use property but excludes property used in a trade or business (e.g., delivery truck, land used as a parking lot).
Limit of Capital Loss offset against ordinary income
$3,000/year capital loss can be used to offset ordinary income
Alternate valuation method for inheritance
Fair Market Value six months after the date of the death
Treatment of carried back/forward net capital loss
treated as a short-term capital loss, whether or not it was short term when sustained
Treatment of bond premium amortization for individual taxpayer
may reduce the bond’s basis by the amortization of the premium.
the amount of bond premium attributable to the tax year may be used to offset interest received on the bond
cannot be used as an itemized deduction
