Chapter13_Notesinclass

Chapter13_Notesinclass - Week 2 March 10-11 Basis, Gains...

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Unformatted text preview: Week 2 March 10-11 Basis, Gains and Losses and Nontaxable Exchanges LEARNING OBJECTIVES After completing this section, you should be able to: 1. Understand the computation of realized gain or loss on property dispositions. 2. Distinguish between realized and recognized gain or loss. 3. Explain how basis is determined for various methods of asset acquisition. 4. Describe various loss disallowance provisions. 5. Understand the rationale for nonrecognition (postponement) of gain or loss in certain property transactions. 6. Apply the nonrecognition provisions and basis determination rules for like-kind exchanges. 7. Explain the nonrecognition provisions available on the involuntary conversion of property. 8. Describe the provision for the permanent exclusion of gain on the sale of a personal residence. 9. Identify other nonrecognition provisions contained in the Code 10. Identify tax planning opportunities related to selected property transactions. Preparation: Reading Assigment: Most Important: Concepts Relating to Gain/Loss 13-3 to 13-7 Basis (cost) 13-8; (gift) 13-11 to 13-14; (decedent) 13-14 to 13-15 Disallowed Losses 13-17 Wash Sales 13-18 Basis Adjustments 13-22 (Concept Summary on 13-23) Like-kind exchanges 13-25 to 13-32 Sale of Residence 13-37 Realized Gains and Losses Amount Realized > Adjusted Basis=Realized gain Adjusted Basis>Amount Realized=Realized loss In this case the term realized is very important and needs to be distinguished from gain or loss recognized. Steve bought 100 shares of Cheesecake factory stock on March 12, 2006 for $27.03 per share. On January 22, 2008 the stock closed at $18.19. What is Steves realized loss? $0 Generally, we need some sort of trigger event to shift our unrealized gains/losses to realized gains and losses. Same facts as above except Steve sold his shares on January 22 for $18.19 per share. What is Steves realized loss? $884.00 Generally, we need some sort of sale, exchange or disposition to realize (and recognize) a gain/loss. There are a few exceptions. For example, some forwards and futures require fair market value recognition and so gain/loss may be recognized even though no sale, exchange or disposition has taken place (1256). Sales, Dispositions and Exchanges: What is a Sale transfer of property for money or a mortgage, note, or other promise to pay money. Exchange transfer of property for other property or services....
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This note was uploaded on 04/20/2008 for the course ACCTG 322 taught by Professor Gill during the Spring '08 term at San Diego State.

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Chapter13_Notesinclass - Week 2 March 10-11 Basis, Gains...

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