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15 Cards in this Set

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Gains and loses computation from the “sale or other disposition of property”—§1001(a)
Amount Realized (AR) – Adjusted Basis/Tax Investment (AB) = taxable gain or deductible loss
IRA §61- Gross Income
“all income from whatever source derived”
Glenshaw Glass- Gross Income
“undeniable accessions to wealth, clearly realized and over which the taxpayer has complete dominion"
§1012 Basis
basis of property shall be the cost of such property
-cost: cash paid, FMV of property traded
§ 1016. Adjustments to basis “Adjusted Basis”
The net cost of an asset after adjusting for various tax-related items (e.g. Appreciation/depreciation).
Define "Tax Expenditure"
Tax expenditure = the tax revenue lost because of a tax exemption.
Define "Putative Tax"
Putative tax = the difference between the investment returns on comparable taxable and tax-exempt investments.
Define "Deadweight Costs"
Deadweight cost = the excess, if any, of the tax expenditure over the putative tax.
Define "Realization" "Disposition"
Occurs when property is sold, exchanged, or otherwise transferred for materially different property. §1001(b)
Define "Recognition"
Income is recognized as taxable once it becomes realized. §1001(a). May be gain or loss.
$5 car (adjusted basis) exchanged for $6 land (amount realized) results in $1 realized gain. $1 recognized as income.
Define "Basis"
Basis= The value of TP's investment in acquiring property. §1012
Tom pays $5,000 for car. He has $5,000 basis in the car.
Define "Cost Basis"
Cost Basis: TP acquires property in exchange for....
Cash= Cash
Property= FMV of property
Services= FMV of services
TP trades $5K car for $6K land.
Define "Adjusted Basis"
TP's basis may increase/decrease in connection to property's appreciation/depreciation.
Define "Sale"
Sale= a transfer of property for cash (or the assumption of liabilities).
Define "Exchange"
Exchange= transfer of property for non-cash property that differs materially in kind or extent from the property transferred.