CH11_Presentation - Chapter 11 Property Dispositions...

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Chapter 11 Property Dispositions
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11 -2 Under the capital recovery concept , a property’s basis may be recovered before any taxable income is realized from disposal of property. No income or loss is recognized for tax purposes until it has first been realized . Concept Review
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11 -3 Property Disposition Property Disposition Amount realized from disposition less: Adjusted basis of property Realized gain (loss) less: Allowed deferral Recognized gain (loss)
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11 -4 Amount Realized Amount realized is gross sales price less selling expenses. Gross sales price is the amount received by the seller from the buyer and includes Cash and FMV of property or services received Seller’s debt assumed by or paid by the buyer Gross sales price is decreased by amounts given to the buyer by the seller Buyer’s expenses paid by or assumed by the seller
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11 -5 Effect of Debt Assumption Assumption of debt is treated as a realization of income similar to paying or receiving cash Assumption of the seller’s debt increases sales price (as if buyer paid cash) Assumption of debt by the seller decreases the sales price (as if buyer received cash)
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11 -6 Character of Gain or Loss Amount realized from disposition less: Adjusted basis of property Realized gain (loss) less: Allowed deferral Recognized gain (loss) Ordinary Section 1231 Capital Personal Use Character of gain (loss) Gains Loss not deductible
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11 -7 Capital Gains and Losses A capital asset is “any asset other than inventory, receivables, copyrights, assets created by the taxpayer, and depreciable or real property used in a trade or business.” A collectible gain or loss results from the sale or exchange of works of art, gems, metals, antiques, rugs, stamps, wine, etc. held more than 12 months.
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Capital Gains and Losses Holding Period The holding period for capital assets is how long the taxpayer owned the asset. Long-term means the asset was held for more than 12 months. Short-term means the asset was held for < 12 months. Determining holding period is the first
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This note was uploaded on 02/20/2009 for the course H ADM 422 taught by Professor Lhensley during the Fall '08 term at Cornell University (Engineering School).

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CH11_Presentation - Chapter 11 Property Dispositions...

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