Chapter 9 10-11

Chapter 9 10-11 - ACCT 403 CHAPTER 9 FALL 2011 PROPERTY...

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ACCT 403 CHAPTER 9 – FALL 2011 PROPERTY ACQUISITIONS I. Classifications of Property 1. Personal versus business versus investment versus mixed a. Important to distinguish for purposes of determining whether depreciation deductions or losses are allowable. 1. Not allowed if the asset is a personal use asset. 2. Partially allowed if the asset is a mixed-use asset. b. As discussed in chapter 11, also is important to determine whether ordinary loss (business) versus capital loss (investment). 2. Real (realty or real estate) versus personal (personalty) property. a. Important for determining type of depreciation allowed and whether depreciation recapture (or unrecaptured depreciation for real estate) applies. b. Real property is defined as land and buildings and components. 1. Since land is not depreciable, must allocate the purchase price to the land and building components (discussed later). c. Personal property – property other than land and buildings. 3. Tangible versus intangible a. Important for determining whether the cost of the asset is depreciable or amortizable (discussed in chapter 10). b. Tangible– has physical substance. c. Intangible – lacks physical substance. Is an asset right (patents, copyrights, etc.). 4. See examples 1-3, pages 4-5 and Table 9-1, page 6. II. Basis Determination A. Adjusted Basis Generally = Cost + Improvements - Capital Cost Recovery Allowances. 1. Cost Generally = Purchase Price. a. Purchase price equals (1) cash paid + (2) FMV of other property or services transferred in the exchange + (-) debt assumed (relieved). b.
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Chapter 9 10-11 - ACCT 403 CHAPTER 9 FALL 2011 PROPERTY...

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