Property taxation Flashcards Preview

2019 reg SY > Property taxation > Flashcards

Flashcards in Property taxation Deck (33)
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1
Q

5-Year Property:

7-Year Property:

A

5-Year Property: Computers, autos, trucks, machinery, and equipment
7-Year Property: Furniture and fixtures

2
Q

Half-Year Convention

A

Half-Year Convention:

One-half year’s depreciation in year of acquisition and one-half year’s depreciation in year of disposal

3
Q

Sec 179 limit: May elect to expense up to the limit for business-use new or used personal (not real) property per return (particularly subject to tinkering by Congress)

A

Year Maximum 2019 $1,000,000
Phase-out Threshold $2,500,000
Year

Cannot result in net operating loss (NOL)

4
Q

Real Property Categories

  1. Residential Rental:
  2. Non-residential: Straight-
A

Real Property Categories

  1. Residential Rental: Straight-line over 27½ years
  2. Non-residential: Straight-line over 39 years
5
Q

Real property

Mid-Month Convention:

A

Mid-Month Convention: One-half month’s depreciation in month of acquisition and one-half month’s depreciation in month of disposal

6
Q

NOT Capital Assets (MR CIA)

A

M Machinery and equipment used in business R Real estate used in business C Copyrights – in hands of original artist I Inventory A Accounts/notes receivable

7
Q

Section 1231 Assets:

A

Section 1231 Assets: Depreciable property and real estate used in business that were held more than one year before being sold

8
Q

Section 1245:

Section 1250:

A

Section 1245:personal property

Section 1250:real property

9
Q

Intangible assets amortization

A

180 months

10
Q

Capital loss
Individual:
Corp:

A

Capital loss
Individual:Deduct up to $3,000 loss on business-use or investment property in the current year and carry forward the remaining indefinitely
No losses allowed on personal-use property

Corp: (capital losses only offset capital gains) Carry back 3 years and forward 5 years

11
Q

Gift Donee’s basis:

1. basisFMV

A

Gift Donee’s basis:
1. basisFMV
magic hands!
in between>No gain/loss

12
Q

Inheritances

Donee’s basis:FMV of

A

Donee’s basis:FMV of

  1. date of death
  2. if AVD is chosen, then use FMV 6 months after date of death
  3. If AVD is chosen and property is distributed within 6 months, then use FMV on date of distribution
13
Q

Like kind exchange

A

Personal to personal,
real estate to real estate

basis of old asset
boot paid
(boot received)
taxable gain recognized (financial gain)

14
Q

A:
Building FMV 500,000
Mortgage 100,000
Basis 300,000

B:
Building FMV 400,000
Basis 250,000

A
FMV of building received by A $400,000 
Debt relief (mortgage relief) 100,000 
Total consideration $500,000 
Basis of the old asset (300,000) 
A's gain indicated $200,000

Gain recognized is the lower of indicated gain ($200,000) or boot received ($100,000). Thus, the recognized (taxable) gain is $100,000.

15
Q

A:
Building FMV 500,000
Mortgage 100,000
Basis 300,000

B:
Building FMV 400,000
Basis 250,000

A

Basis of old asset $300,000 Boot paid 0
Boot received (debt relief) (100,000)
Gain taxed 100,000
A’s basis in new asset $300,000

16
Q

related party (family members, 50% > shareholder/partner)transaction

A

Gift basis rule is applied!

17
Q

Involuntary conversions

A

Gain deferred, if replacement property is purchased by 12/31 of third year that the gain is realized

18
Q

Stock Dividends:

A

Stock Dividends: Generally not taxable, unless cash option

19
Q

Estate Taxes

1.Transfer tax(once)

A

Due 9 months after death, 9-month extension available

20
Q

Estate Taxes

2. Income tax (annually)

A

Form 1041, U.S. Income Tax Return for Estates and Trusts

income earned from a going concern

21
Q

Gross Estate

A

Fair market value of all world-wide property

Life insurance proceeds

22
Q

Gifts must be present interest

A

Incomplete gifts or gifts of future interest do not qualify for exclusion (14,000USD)

23
Q

Doesn’t have to deduct Y1 dep exp from

A

MACRS basis when to calculate Y2 dep

24
Q

Gift tax is applied to

A

the FMV of the gift of the date of transfer.

but the basis of gift is carryover from donor!

25
Q

donee’s basis is donor’s basis.
and when donor paid gift tax,
the gift tax * appreciated rate = donee’s basis!

A

The donor had a basis of $10,000 and FMV of $50,000 at time of gift.
The donor paid gift tax of $5,000. Later, the donee sells the gift for $100,000.

Appreciation of $40,000 / Basis of $50,000 = 80%
80% × $5,000 tax = $4,000 adjustment
Sale $100,000
Adjusted Basis ($10,000 + $4,000) (14,000)
Donee Gain $ 86,000

26
Q

On August 1, Graham purchased and placed into service an office building costing $264,000, including
$30,000 for the land. What was Graham’s MACRS deduction for the office building in that year?

A

2,250 USD

264,000-3,000(no dep on land) / 39 * 4.5/12 = 2,250

buildingは月初で買っていても、mid month convention なので注意!

27
Q

A taxpayer had an investment in real estate with an adjusted basis of $125,000, subject to a mortgage
of $75,000. When the property had a value of $375,000, it was exchanged for another parcel of land,
which the taxpayer is similarly holding for investment. The other party is assuming the $75,000 mortgage
in the exchange. The land acquired has a fair value of $260,000 and is subject to a mortgage of $40,000,
which the taxpayer is assuming. In addition, the taxpayer is receiving a recreational vehicle with a fair
value of $30,000, and $50,000 in cash.
How much gain, if any, should the taxpayer recognize on the exchange, and what will be the basis in the
new property?

A

Dr: New property basis 125,000
COD 75,000
vehicle received 30,000
cash 50,000
TOTAL 280,000

Cr: old property basis 125,000
mortgage on new property 40,000

   Gain recognized should be 280,000-165,000=115,000
28
Q

machine

equipment

A

sec 1245

29
Q

In laws
uncle nephew
ancestors

A

are NOT related party!

Devalue property sales to related party>magic hands!

30
Q

A taxpayer had an investment in real estate with an adjusted basis of $125,000, subject to a mortgage
of $75,000. When the property had a value of $375,000, it was exchanged for another parcel of land,
which the taxpayer is similarly holding for investment. The other party is assuming the $75,000 mortgage
in the exchange. The land acquired has a fair value of $260,000 and is subject to a mortgage of $40,000,
which the taxpayer is assuming. In addition, the taxpayer is receiving a recreational vehicle with a fair
value of $30,000, and $50,000 in cash.

A

Gain recognized $115,000 Basis for real estate$125,000

new basis 125,000
cash 50,000
car 30,000
COD 75,000
TTL:155,000

old basis 125,000
old mortgage 40,000
Gain 115,000

31
Q

appreciated property, basis

A

depreciated property, use magic hands!

32
Q

private company sec 1244 stock > ordinary income.

A

depreciable personal’real property used in business>sec 1231 asset

33
Q

capitalize cost

OK>shipping cost, transit insurance, sales tax

A

NO>Warranty cost