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31 Cards in this Set
- Front
- Back
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What types of property do not qualify for Sec 1031 qualify as like=kind exchanges?
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1)personal use assets;
2) inventory; 3)securities; 4)foreign real estate for domestic real estate; 5)partnership interests; 6) livestock |
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What is boot?
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Boot=cash and assumption of liabilities. The receipt of boot will result in the recognition of gain if there is a realized gain; or result in no recognition if there is a realized loss. When boot is received, the actual amount of recognized gain is equal to the lesser of the realized gain or the boot received.When boot is appreciated other property, gain or loss is recognized as if there had been a sale of the asset given as boot. This gain is ordinary
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What are the procedural and reporting requirements for section 1031 like kind exchange
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1)The replacement property must be identified in writing within 45 days of selling the original property and 2)The original transferor must complete the exchange and take the title to the replacement property within 180 days after the transfer of the original property If sec 1031 is xchanged with a related party, the tp and related party must not dispose of the property until after 2 years
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What is section 1033 nontaxable exchange
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Exchange resulting from involuntary conversion, such as theft, condemnation. The replacement property must be similar in service or use to the involuntarily converted property. The tp has two years to replace the property
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What is section 1035 exchange
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A tax free xchange of life ins for life ins; annuity contract for annuity contract or life insurance for annuity. cannot xchange annuity for life insurance. Life insurance and annuities may be xchange for tax qualified LTC policies.
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What is section 121 sale of residence about?
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Sec 121allows the gain exclusion of up to $250K or $500K MFJ to tp on sale of home if 1)the home was owned and used by tp as a principal residence for at least 2 of the 5 years preceding the date of sale; 2) either spouse can meet the ownership but both must meet the use test. If tp fails to meet either test because of a change in employment or health, the tp may be entitled to a partial exclusion based on the shorter of the tp's use or ownership. Surviving spouses get the exclusion for up to two years from m the date of death
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Explain interaction of section 121 gain exclusion with section 1031 like kind xchange
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A tp who excludes gain upon the sale of a personal residence (section 121 exclusion) can also benefit from a deferral of gain under the like kind exchange provision (section 1031). Accordingly, the taxable gain to be reported, is calculated by: 1) apply the section 121 gain exclusion before the section 1031 gain deferral. 2)apply the section 1031 deferral provision to any gain attributable to depreciation deductions;3)Boot received in xchange for the property is taken into account only to the extent that boot exceeds sec 121 exclusion
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What is the tax treatment for personal use vacation property ( rented for rented less than 15 days per year) and used personally?
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Exclude rental income from gross income. Expenses nondeductible except mortgage interest and taxes on sch a
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What is the tax treatment for vacation property for rental use (rented 15 days or more a year and not used for personal use more than the greater of 14 days or 10% of rental days
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Considered a rental. Allocate expenses btwn business and personal. Can deduct loss up to $25K (phase out at AGI between $100 and $150). Report income and deductible expenses on Sec E to the extent of gross rental income
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What is the tax treatment for mixed use vacation property (property rented at least 15 days a year and used for personal use more than 14days per year or 10% of rental days
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allocate expenses between business and personal. Deduct expenses on schedule e. Deduct personal portion on schedule A. Cannot deduct a loss
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What are the hobby rules
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All of the gross hobby income is reported as other income on 1040 and expenses are on sch a to the extent of income. An activity is presumed not to be a hobby if there are profits from the activity in any of three of five consecutive tax years
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On January 10 of the current year, Mark sold stock that carried an adjusted tax basis of $6,000 to his son Les for $4,000 (fair market value). On July 31 of the next year, Les sold the same stock for $5,000 in a bona fide arms-length transaction to Sara, who is unrelated to Les or Mark. What is the proper tax treatment for these transactions?
A) Mark has a recognized loss of $2,000 in the current year. B) Neither Mark nor Les has a recognized gain or loss in either year. C) Les has a recognized gain of $1,000 in the next year. D) Les has a recognized gain of $2,000 in the next year. |
B This is an application of the related party rules. Neither Mark nor Les has a recognized gain or loss in either year. Mark has a $2,000 realized loss in the first year, but cannot recognize it. Mark forever loses the ability to take a deduction for the loss because it is the result of a related party transaction. Les has a realized gain of $1,000 in the second year. He can reduce his gain by Mark's loss (up to the amount of gain). Les has no gain or loss in the second year. The remaining $1,000 loss is no longer available to either of them.
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Rick and Fran were divorced in 2011. Under the divorce agreement, Fran was to receive $100,000 in 2011, $85,000 in 2012, and $60,000 in 2013 and beyond. Payments were to cease upon death or remarriage. How much, if any, must Rick recapture in 2013?
A) $27,500. B) $0. C) $15,000. D) $30,000. |
A) $27,500.
Front-loading (also referred to as alimony recapture) is a measure to discourage disguising property settlements as alimony. If there is more than a $15,000 decrease in alimony payments between any of the first three years, alimony recapture may be required. The formulas are: R3 = R1 + R2 R2 = P2 − (P3 + $15,000) R1= P1- [P2-R2+p3-2 +15000] In this case, R2 = $85,000 − ($60,000 + $15,000) = $10,000 R1 = $100,000 − [($85,000 − $10,000 + $60,000) ÷ 2] + $15,000 R1 = $100,000 − ($67,500 + $15,000) = $100,000 − $82,500 = $17,500 R1 = $17,500 R2 = $10,000 R3 = $17,500 + $10,000 = $27,500 Recapture in year 3 (2013) There is a shortcut that some students prefer to use for calculating alimony recapture for Year 3: R3 = P1 + P2 − 2P3 − $37,500 R3 = $100,000 + $85,000 − 2($60,000) − $37,500 R3 = $185,000 − $120,000 − $37,500 R3 = $27,500 |
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Can a surviving spouse use deceased CG exclusion on personal residence, Sec 121. If so how long
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Yes. Can use the deceased spouses $250K 2 years from date of death.
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If a person cannot pass the residence test under sec 121 (personal residence gain exclusion) when may a partial exclusion be used
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medical, job or a damn good reason.
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What day do you start counting the holding period
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The day after the item is purchased
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How are capital gain distributions treated
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always as LTCG
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A What happens if a tp sells stock and the spouse then repurchases identical stock within 30 days and they file MFS
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Still treated as a wash sale. Filing status on married couples is insignificant
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What is the maximum CL short term or long term that can be taken in a year
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$3K
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How is GP for installment sale purposes calculated when a mortgage is assumed
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The mortgage assumption is subtracted from the sales price b4 calculating the GP percentage--unless it exceeds the adjusted basis--to derive the IRS contract price rather than selling price. The mortgage assumption is considered a return of basis in theyear of sale
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What is taxable and how on the sale of depreciated property on an installment basis at a gain
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All of the depreciation is recaptured as ordinary income. GP is calculated on on the difference between adj basis and the sales price.
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What is the sec 121 military exception
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Five year period can be suspended for up to ten years for military, peace corp and intelligence officers
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What is the sec 121 discibility exception
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Use is reduced toone year if tp becomes physically or entally unable to care for himself
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How does the sec 121 apply to land sale
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If tp sales the land but not the house, gain cannot be excluded
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How are sec 1031like kind exchanges treated for related parties
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Gain may be excluded. However if either party disposes of the property within 2 years after sec 10
31 xchange, the xchange is usually disqualified from nonrecognition of gain |
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What is the replacement period for sec 1031 involuntary conversions
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Most = 2 yrs
Business or investment real property=3 years Livestock because of weather=4 years Federally declared disaster areas=4-5 years |
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Is condemnation of home can use sec 121 exclusion of gain
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yes
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What events qualify in order to claim a reduced exclusion sec 121 from sale
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divorce or legal sep
multiple births serious health problems condemned home job |
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What is the date that a replacement property must be purchased
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Given allowable replacement period, December 31 (i.e. house sold 4/15/2011, then replacement period is 12/13/2013)
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What type of property DOES NOT qualify for like kind xchanges
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chap 8
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When can the tp defer reporting gain on an involuntary conversion
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when tp receives insurance proceeds or another source and invests proceeds in property similar to converted property Otherwise gain or loss is recognized when realized. But tp cannot deduct a loss on personal use property unless it is from a casualty or theft.
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