Term
|
Definition
| depreciable property used in a trade/business and realty that have been owned a year or less (examples: inventory, accounts receivable, copyrights, music, artistic, and literary works held by creator) |
|
|
Term
|
Definition
| depreciable property used in trade or business and realty that have been owned for more than a year |
|
|
Term
|
Definition
| assets not used in trade/business including property held for investment purposes and personal use |
|
|
Term
| Realized gain/loss formula |
|
Definition
| =amount realized-adjusted basis |
|
|
Term
|
Definition
Gain basis= adjusted basis of the donor
Loss basis= lower of FMV or adjusted basis of the donor
Depreciation basis= gain basis |
|
|
Term
| Gift tax adjustment to basis formula |
|
Definition
| =unrealized appreciation/((FMV at gift date-annual exclusion) x gift tax paid) |
|
|
Term
| Holding period for gifted property |
|
Definition
gain basis: holding period includes the holding period of the donor
loss basis: holding period begins on date of gift |
|
|
Term
| Inheritance basis and holding period |
|
Definition
basis= FMV at death date or FMV on alternate valuation date (6 months after death)
holding period= long term
(**special rule for 2010: executor can elect to waive estate tax. if waived, basis= lower of FMV or adjusted basis) |
|
|
Term
| Property converted from personal to investment/business use basis |
|
Definition
Gain basis=adjusted basis
Loss basis=lower of adjusted basis or FMV at date of conversion
Depreciation basis=loss basis |
|
|
Term
| net capital loss rules for individuals |
|
Definition
| $3000 deductible per year for AGI. excess loss is carried forward to offset 28% gains, then 25% gains, and then 15% gains |
|
|
Term
|
Definition
| -portion of capital gain net income that is eligible for a reduced tax rate. -net long-term capital gain in excess of a net short-term capital loss |
|
|
Term
| Corporation treatment of net capital loss |
|
Definition
| carried back three years and forward five |
|
|
Term
| Preferential Tax rate on net capital gains (rules for real-estate and collectibles as well) |
|
Definition
-Net capital gain is taxed at max of 15%. If TP tax rate is normally <15%, then the effective rate is 0%
-net capital gain attributable to straight-line depreciation on real estate: 25%
-net capital gain on collectibles: 28% |
|
|
Term
| Gains from sale of "Qualifying small business stock" |
|
Definition
| noncorporate TP is eligible from 50% exclusion if business has less than $50 million in capital and stock is held for 5 years. max gain eligible is lower of ten times the TP basis in stock or $10 million. 50% is excluded and other 50% is taxed at 28% |
|
|
Term
| gain from qualifying small business stock sale between Feb. 17, 2009 and Sep. 28, 2010 |
|
Definition
| 50% gain exclusion is increased to 75% |
|
|
Term
| gain on sale of qualifying small business stock sale between Sep. 27, 2010 and Jan. 1, 2012 |
|
Definition
|
|
Term
|
Definition
| to qualify as a 1244 company, the company must... 1-be a domestic corporation 2-capital receipts don't exceed $1,000,000 at the time the stock is issued. 3-50% of corporation's income must have been generated from sources other than investment income during previous 5 tax years |
|
|
Term
| gains from sale of section 1244 stock |
|
Definition
| treated as regular long-term capital gains, but losses are treated as ordinary losses (max loss of $100,000 for married/joint filers and $50,000 for singles) *seller of stock must be original holder |
|
|
Term
| Section 1231 is designed to.. |
|
Definition
| provide capital gain treatment to a net gain generated from transactions involving involuntary conversions and disposition of trade assets |
|
|
Term
| effect of depreciation recapture |
|
Definition
| limits amount of gain eligible for section 1231 treatment by recharacterizing the gain |
|
|
Term
|
Definition
| recharacterizes gain on PERSONALTY as ordinary income to extent of accumulated depreciation |
|
|
Term
|
Definition
| recapture of accumulated accelerated depreciation in excess of SL depreciation on realty as ordinary income |
|
|
Term
| Unrecaptured section 1250 gain |
|
Definition
| recharacterizes gain on REALTY as eligible for a special 25% tax rate to extent of accumulated SL depreciation |
|
|
Term
|
Definition
| tangible assets that are moveable |
|
|
Term
|
Definition
|
|
Term
|
Definition
-section 1231 gains must be offset by net 1231 losses from the five preceding tax years that have not already been recaptured. 1231 gains to the extent of these losses is treated as ordinary income.
-if 1231 losses exceed 1231 gains, then the loss is deductible as an ordinary loss. |
|
|
Term
| recovery for personalty (200% or 150% declining balance) |
|
Definition
-uses mid-year convention regardless of when it is purchased.
-mid-quarter convention is used more than 40% of personalty acquired during year is purchased in last quarter of the year |
|
|
Term
|
Definition
| mid-month convention is used regardless of when realty is actually purchased. |
|
|
Term
|
Definition
|
|
Term
|
Definition
| automobiles, trucks, computers, and peripheral equipment, copiers |
|
|
Term
|
Definition
| furniture and fixtures, most machinery |
|
|
Term
|
Definition
| land improvements, restaurant property, retail improvement property |
|
|
Term
|
Definition
|
|
Term
|
Definition
|
|
Term
| Bonus depreciation (automatically elected unless TP chooses not to use) |
|
Definition
-allowed for assets with recovery periods less than or = to 20 years
-property purchased and placed in service in 2008, 2009, and before Sep. 9th, 2010: 50% additional depreciation allowed
Sep. 8, 2010 - Dec. 31, 2011: 100% additional depreciation |
|
|
Term
|
Definition
| -electors may expense lessor of business income or $500,000 (for 2010 and 2011) of tangible personalty if used in a trade activity (can't exceed income from the business and is phased out $ for $ if qualified assets purchased exceeds $2,000,000) -real property can qualify (in 2010 and 2011) but only $250,000 |
|
|
Term
| alternative depreciation system (ADS) |
|
Definition
| 150% declining balance or SL can be used for tangible personal property |
|
|
Term
| luxury auto limits for automobile that is 6000 lbs or less |
|
Definition
| first year depreciation for 2011 is $3,060 limit for cars and $3160 for vans. an additional $8000 can be deducted in year of purchase if Section 179 is elected |
|
|
Term
| trucks, vans and SUVs over 6000 lbs |
|
Definition
| exempt from luxury auto rules BUT section 179 election is limited to $25,000 |
|
|
Term
|
Definition
-assets such as computers and vehicles that are used commonly for business and personal uses
-to use regular MACRS rules, the business use of listed assets must exceed 50% of total use. |
|
|
Term
|
Definition
| intangible assets that aquired, not created, can be amortized on a SL basis of 15-years (examples: goodwill, franchise, trademarks, etc.) |
|
|
Term
|
Definition
-$5,000 can be deducted (phased out $ for $ if over $50,000 incurred)
-expenses not deducted must be capitalized and amortized over 180 months |
|
|
Term
|
Definition
| same rules as organization except for 2010 the maximum deduction is increased to $10,000 and phase out begins at $60,000 |
|
|
Term
|
Definition
losses: never recognized
recognized gain: lesser of realized gain or boot received
-must be business or investment, like-kind property
-realty is all considered like-kind
-business property can be exchanged for investment property
-must be domestic |
|
|
Term
| holding period of like kind property |
|
Definition
| surrendered property holding period tacks onto holding period of like-kind property received |
|
|
Term
|
Definition
-nonqualifying property received by taxpayer
-triggers gain recognition |
|
|
Term
| basis of like-kind property formula |
|
Definition
| =FMV of property received-postponed gain + postponed loss |
|
|
Term
|
Definition
-result of a casualty, theft, or condemnation
-realized gain is eligible for deferral if elected by TP (doesn't apply to losses) |
|
|
Term
|
Definition
-must be similar or related in the service or use made by the taxpayer
-must be made within two years from end of tax year in which the gain is received (3 years if condemnation of business realty) |
|
|
Term
| formulas to find recognized gain of replacement property |
|
Definition
lesser of:
amount realized from conversion - realized gain/loss
-OR-
amount realized from conversion - cost of replacement property |
|
|
Term
| adjusted basis of replacement property |
|
Definition
| cost of new property - deferred gain |
|
|
Term
| holding period of replacement property |
|
Definition
| carries over from old property |
|
|
Term
|
Definition
-losses from the sale of securities are not recognized if similar securities are purchased within 30 days before or 30 days after the sale (doesn't apply to gains)
-TP takes adjusted basis in the new securities equal to the cost plus the deferred loss from the wash sale
-holding period tacks |
|
|
Term
|
Definition
-losses from sales of business property to related parties are not recognized
-holding period DOES NOT tack |
|
|
Term
|
Definition
-a transaction when the TP borrows and sells shares identical to those already owned
-gains must be recognized
-losses are deferred |
|
|
Term
| sale of principle residence |
|
Definition
| a single taxpayer can exclude realized gains up to $250,000 and married TP can exclude up to $500,000 if both use the residence and at least one owns the house (must be owned and used for 2 of past 5 years) |
|
|
Term
| recognition of deferred gain |
|
Definition
| triggered by receipt of cash |
|
|
