Week7.Lecture.Chapter14

Week7.Lecture.Chapter14 - Chapter 14 PropertyTransactions:

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Chapter 14 Property Transactions: Determination of Gain or Loss and Basis Considerations
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C14 - C14 - 2 Determination of Gain or Loss (slide 1 of 4) Realized gain or loss Difference between amount realized from sale or other disposition of the asset and its adjusted basis Realized Gain = Amt Realized – Adjusted basis Sale or other disposition Includes exchanges, trade-ins, casualties, condemnations, thefts, bond retirements
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C14 - C14 - 3 Determination of Gain or Loss (slide 2 of 4) Amount realized = Cash + FMV of prop. received + liabilities/mortgage assumed by buyer – selling expenses FMV: Value of asset determined by arms-length transaction, i.e., amount set by transaction between willing buyer and seller with neither obligated to enter into transaction
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C14 - C14 - 4 Determination of Gain or Loss (slide 3 of 4) Adjusted basis Adjusted Basis = Initial Basis + capital additions – capital recoveries Capital additions: Additions and improvements that are capital in nature and not currently deductible (i.e. NOT ordinary maintenance and repairs) Capital recoveries: depreciation, casualty and theft losses or recovery of capital (i.e. corporate or partnership distribution)
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C14 - C14 - 5 Determination of Gain or Loss (slide 4 of 4) Recognized gain or loss (what is actually reported on the tax return) Amount of realized gain or loss that is included in or deducted from gross income Realized gains and losses are not always recognized Realized gains may be deferred or excluded I.e. gain on sale of principal residence; “like-kind” exchanges Realized losses may be deferred or disallowed I.e. personal use assets (but gains are recognized)
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C14 - C14 - 6 Basis Considerations (slide 1 of 4) Original basis of an asset is generally its cost (cash + FMV of property originally given/paid to acquire the property) Also includes: interest incurred in financing construction/improvements of property (interest must be amortized, so, added to cost Identification problems Security (stock) sales where specific identification not possible, use FIFO to compute basis
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This note was uploaded on 06/21/2010 for the course MANAGEMENT 127a taught by Professor Gadner during the Spring '08 term at UCLA.

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Week7.Lecture.Chapter14 - Chapter 14 PropertyTransactions:

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