5 Outline Notes Chapter 5.docx

5 Outline Notes Chapter 5.docx - Outline Notes Chapter 5...

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Outline Notes Chapter 5 Outline Notes Chapter 5 – Property Transactions Capital Gains and Losses REALIZED (RECOGNIZED) gain or loss only (NOT unrealized gains and/or losses) Sale price – Basis (Cost) = GAIN or LOSS o Basis may have changed due to additions/ capital improvements for example, a home o When you sell something, a reduction of a liability is a POSITIVE/BENEFIT for you……. Ex: $50,000 cash + $25,000 debt reduction for an asset with a basis of $90,000 = $15K LOSS o Sales and Disposition of Capital Assets: Reported on Schedule D (and Form 8949, detailed listing of transactions) Sale of land Sale of membership country club (asset) Sale of collectibles Sale of stock (securities) UNLESS identified otherwise, assume FIFO for stock purchases Stock purchases of the same company can be made over time at different COSTS (BASIS) Allocation of Basis MAY be necessary if LESS THAN the ENTIRE amount is sold o Example: Own huge piece of land that cost $5 million
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