Chapter+14+Notes+2016 - Bob Ryan DePaul University Class...

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Bob RyanDePaul UniversityClass NotesAccounting 380/548Tax Treatment of Individuals and Property TransactionsText 2016Chapter 14 – Property Transactions: Gain or Loss and Basis Considerations1.Determination of Gain or Lossa.Realized gain or loss:1.Difference between amounts realized from sale or other disposition of the asset and its adjusted basis.2.Sale or other dispositions, includes trade-ins, condemnation, thefts, bond retirements.b.Amount realized from disposition:1.Total consideration received, includes cash, FMV of property received, mortgages/loans transferred to buyer.a.FMV = Value of asset is determined by an arms-length transaction. An arms-length transaction would be a transaction amount set between a willing buyer and seller with neither obligated to enter into transaction.2.Reduced by any selling expenses.c.Adjusted Basis:1.Original cost (or other adjusted basis) plus capital additions less capital recoveries.d.Capital Additions:1.Cost of improvements and betterments to the property which are capital in nature and not currently deductible.e.Capital Recoveries:1.Amount of basis recovered through:a.Depreciation or cost recovery allowances1
b.Casualty and theft losses (and insurance proceeds)c.Certain corporate distributionsd.Amortization of bond premiume.Easementsf.Recognized gain or loss:1.Amount of realized gain (loss) that is included in (deducted from) gross income.
2.Capital Recovery Doctrine:

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