Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
50 Cards in this Set
- Front
- Back
What is section 1231 property?
|
a. Depreciable or amortizable property (personal or real) used in a business b. Leasehold interests c. timber, coal, or iron ore d. Livestock or unharvested crops e. Goodwill and other Section 197 intangible f. Copyrights if acquired for investment |
|
What Is Section 1245 Recapture Property?
|
Any property other than depreciable real property that is or has been subject to an allowance for depreciation or amortization
|
|
What is section 1250 recapture?
|
All real property that is subject to an allowance for depreciation and has never been section 1245 property is subject to section 1250 recapture rules
|
|
Section 1245 Recapture - What is recaptured? Treatment? |
ALL depreciation of the property - ordinary income |
|
Section 1250 Recapture - What is recaptured? Treatment? |
Un-recaptured: Straight Line Depreciation - 25% rate Recaptured: Excess depreciation - ordinary income |
|
What is a Section 1231 gain? |
Total gain - Recaptured Amount = 1231 GAIN |
|
If a business asset is sold under the Installment method, when is the recaptured gain reported? |
Ordinary income in the Year of sale |
|
What is NOT a capital asset? |
ACIDS 1. Accounts or Notes Receivable 2. Copyright WHEN CREATED BY TAXPAYER 3. Inventory or property mainly for SALE TO CUSTOMERS 4. Depreciable property and real estate used in the TP's trade or business 5. Supplies regularly used in the course of TP's trade or business |
|
What is listed property? |
1. passenger automobiles weighing 6000 pounds or less 2. Any other property used for transportation, unless it is an accepted vehicle 3. Property generally use for entertainment, recreation, or amusement 4. Computers and related peripheral equipment, unless used only at a regular business establishment |
|
How are section 197 intangibles treated?
|
Must be amortized over a 180 months
|
|
What are section 197 intangibles?
|
1. Goodwill 2. Going concern value 3. Workforce in place 4. Business books and records, operating systems, or any other information base, including lists or other information concerning current prospective customers 5. A patent's copyright formula process design pattern, know-how, format, or other similar item 6. A customer-based intangible 7. A supplier-based intangible 8. A license, permit, or other right granted by government unit or agency 9. A covenant not to compete in connection with the acquisition of the business 10. Any franchise, trademark, or trade name 11. A contract for the use of, or a term of interest in, any item in this list |
|
What section 197 intangibles cannot be amortized?
|
Any intangibles that you create rather than acquire
(unless you create them in acquiring assets that make up a trade or business or substantial part of the trade or business) |
|
What property qualifies for the depletion deduction?
|
Mineral property or standing timber
|
|
Is a home office used for business and for personal use depreciable?
|
No
|
|
If depreciable property is improved, how is the improvement treated?
|
improvement is treated as separate depreciable property
|
|
Repairs and Improvements- how are repairs treated?
|
Just like any other business expense
|
|
Repairs and improvements- when his repair considered an improvement?
|
1. Increases the value of the property 2. Make the property more useful 3. Lengthens its life |
|
What 3 basic factors determine how much depreciation the taxpayer may deduct?
|
1. Basis in the property 2. Recovery period for the property 3. Depreciation method used |
|
Can the taxpayer depreciate personal use property?
|
No
|
|
What are the 2 main systems of depreciation under MACRS?
|
1. Gen. depreciation system 2. Alternative depreciation system |
|
What is the Gen. depreciation system?
|
1. Taxpayers must use the Gen. depreciation system in most rental activities 2. Recovery periods are usually shorter than under ADS |
|
What is the Alternative Depreciation System?
|
1. Uses the straight line method of depreciation 2. Election applies on a property by property basis for residential rental property and nonresidential real property |
|
For the depreciation options for property placed in service before 1987? (2 options)
|
1. Accelerated cost recovery system - property in service between 1980 and 1987 2. Straight line or declining balance method - property placed in service before 1981 |
|
Can taxpayer's change depreciation method without IRS approval?
|
No
|
|
What are the 2 main methods of depreciation under MACRS?
|
1. Straight line depreciation 2. 200% or 150% declining balance |
|
What convention applies to most transactions?
|
The half-year convention
|
|
What is section 179 depreciation?
|
Instead of depreciating property over time, a taxpayer may elect to claim it as an expense up to $500,000
|
|
Does section 179 depreciation apply to real property?
|
No
|
|
Who is considered a related person in a like-kind exchange?
|
For purposes of a like kind exchange, related persons include: - A taxpayer and certain family members, including only brothers, sisters, half-brothers, half-sisters, spouse, ancestors (parents, grandparents, etc.), and lineal descendants (children, grandchildren, etc.). - An individual and a corporation if the individual directly or indirectly owns more than 50% in value of the outstanding stock of the corporation. - A partnership and a person owning, directly or indirectly, more than 50% interest in the partnership. - A tax-exempt charitable or educational organization controlled by taxpayer or family member |
|
What is listed property?
|
a. Passenger automobiles weighing 6000 pounds or less b. any other property used for transportation, unless it is an excepted vehicle c. property generally used for entertainment, recreation, or amusement (including photographic, phonographic, communication, and video recording equipment) d. computers and related peripheral equipment, unless used only at a regular business establishment and owned or leased by the person operating the establishment e. NOT a cell phone |
|
Is a cell phone listed property?
|
No
|
|
What is Section 1245 property? FULL ANSWER |
Section 1245 property includes anyproperty that is or has been subject to depreciation or amortization and is: - Personal property, - Other tangible property (other than a building or its structural components) that is: Used in manufacturing, production, extraction or furnishing transportation, communications, electrical energy, gas, water, or sewage disposal services, - A research facility used for the activities in (a), - or A facility used in any of the activities in (a) for the bulk storage of fungible commodities, - Real property (other than property described in (2) with an adjusted basis that was reduced by certain amortization recapture deductions listed in section 1245(a)(3)(C) of the Internal Revenue Code - A single purpose agricultural or horticultural structure, - or A storage facility (other than a building or its structural components) used for the distribution of petroleum. |
|
When is a property condemned for tax purposes? |
When the government informs the property owner that the building will be condemned and used for a public purpose. |
|
How are Section 197 intangibles treated? |
MUST be amortized over 180 months |
|
What are Section 197 intangibles? List all 12 |
1) goodwill 2) going concern value 3 workforce in place 4) business books and records, operating systems, or any other information base, including lists or other information concerning current or prospective customers 5) of patents, copyrights, formula, process, design, pattern, know-how, format, or similar item 6) a customer-based intangible 7) a supplier-based intangible 8) a license, permit, or other right granted by a governmental unit or agency 9) a covenant not to compete in connection with the acquisition of a business 10) any franchise, trademark, or trade name 11) a contract for the use of, or a term interest in, any item in this last |
|
Can you amortize a 197 intangible you CREATE? |
Generally, NO unless she creates the in aquiring assets that make up a trade or business or a substantial part of a trade or business |
|
What is depreciable Section 197 deduction property? |
1) tangible personal property 2) machinery and equipment 3) property contained in or attached to a building (not structural components), such as office equipment, refrigerators, which restore counters, printing presses, testing equipment, and signs 4) gasoline storage tanks and pumps and retail service stations 5) livestock 6) other tangible property (except buildings and their structural components) used as: - an integral part of manufacturing, production, or extraction; or an integral part of furnishing transportation, communications, electricity, gas, water, or sewage disposal services - a research facility - bulk storage of fungible commodities 6) off-the-shelf computer software 7) petroleum storage or distribution facilities 8) single purpose agricultural (livestock) or horticultural structures |
|
Reduced Section 179 Deduction - SUV and certain other vehicles |
Cannot expense more than $25,000
Rule applies for vehicles designed to carry less the 9 passengers rated it more than 6000 pounds and not more than 14,000 pounds |
|
Reduced Section 179 Deduction - Passenger Vehicles |
Car: $3,160 Truck or Van: $3,460 |
|
Reduced Section 179 Deduction - business use |
MUST use it more than 50% |
|
Reduced Section 179 Deduction - Cost of qualifying Section 179 Property |
If more than $2 million, reduce by cost more than $2 million |
|
MACRS Recovery Period - 5 year property |
residential real estate furniture, computers, office machinery, autos, light trucks, carpeting, etc. |
|
MACRS Recovery Period - 7 year property |
Office furniture and equipment |
|
MACRS Recovery Period - 15 year property |
roads, fences, shrubbery |
|
MACRS Recovery Period - 20 year property |
utilities and sewers |
|
MACRS Recovery Period - 27.5 year property |
Residential rental property |
|
MACRS Recovery Period - 39 year property |
Commercial Buildings and Structures |
|
Section 179 Deduction - Buy property with cash and trade-in -- what portion permitted as a Section 179 deduction? |
CASH ONLY |
|
Explain Section 1245 recapture rules? |
Section 1245 requires that all gain be treated as ordinary gain to the extent of the depreciation taken on the property disposed of. |
|
Section 1231 recapture period? |
5 years |