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Chapter 13 - CHAPTER 13 CHAPTER 13 Property Transactions...

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Unformatted text preview: CHAPTER 13 CHAPTER 13 Property Transactions Skip Pgs. 26 ­ 39 Realized Gain/Loss vs. Realized Gain/Loss vs. Recognized Gain/Loss Gain/Loss Formula Realized Gain/Loss = Sale Price – Adjusted Basis Recognized Gain/Loss Is the amount of Realized Gain/Loss that is recorded in tax return Adjusted Basis – May Change Over Time Increased by any improvements Decreased by depreciation Recovery of cost is non­taxable Recovery of Capital Doctrine Identification – ex. Employee stock purchase plan Allocation – ex. Asset purchase Goodwill – purchased vs. self­created Basis Computation Issues Basis Computation Issues Stock Dividends – original basis is spread over additional shares received (thereby reducing per share basis) Gifts – basis is affected by: Date of Gift; Basis of property to the Donor; Amount of gift tax paid by Donor; Fair Market Value on Date of Gift Inheritance – usually results in “stepped­up” basis to beneficiaries Asset Sales Between Related Parties ­ members of same immediate family ­ corporation and majority shareholder Disallowed Losses Disallowed Losses Wash Sales Re­Purchase of Same Security Within 30 Days of Sale Unless converted to business use; Then basis is determined as the lower of: Cost or FMV on date of conversion Personal Use Assets Sale of Personal Residence Sale of Personal Residence §121 provides for EXCLUSION of gain on sale of up to $250,000 (up to $500,000 if MFJ) Requirement: Must have been owned AND used as a personal residence for 2 of last 5 years Exceptions: Change in place of employment Health (Disease; Injury; or Accident) Divorce; Death; Disaster ...
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