T11F-Chp-11-1-Property-Dispositions-2011

T11F-Chp-11-1-Property-Dispositions-2011 - Chapter 11...

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Unformatted text preview: Chapter 11 Property Dispositions Howard Godfrey, Ph.D., CPA UNC Charlotte Copyright 2010, Dr. Howard Godfrey Edited November 1, 2011. T11F-Chp-11-1-Property-Dispositions-2011 Introduction Section 1231 Realized Gain-Loss Sec. 1231 Prop. Amount Realized Sec. 1231 Netting Debt Assumptions Recapture Character-Gain-Loss Sec. 1245 Recapture Cap. Gains & Losses Sec. 1250 Recapture Capital Asset Definition Sec. 1245 Property L.Term vs Short-Term Sec. 1250 Property Netting gains & losses Unrecap. 1250 Gain Strategies Summary 11. Property Dispositions Introduction Realized Gain-Loss Amount Realized Debt Assumptions Sale to Related Party Losses on sales to related parties are disallowed Related parties include brothers, sisters, spouse, ancestors and lineal descendents, as well as a more-than 50% owned corporation If related buyer later sells property at a gain, this gain can be reduced (not below zero) by the seller s previously disallowed loss Loss on Sale to Relative - 1 In April 2011, Pam sold stock with a cost basis of $17,000, to Lisa, her sister , for $10,000. In September 2011, Lisa sold the same shares of stock to her neighbor, Niki, for $20,000. What is Lisa's gain for 2011? a. $0 b. $3,000 c. $7,000 d. $10,000 Price received by Pam $10,000 Pam's basis in stock 17,000 Loss realized by Pam Loss Disallowed on sale by Pam Loss recognized by Pam Loss on Sale to Relative - 2 Price received by Pam $10,000 Basis to Pam 17,000 Loss realized by Pam (7,000) Loss Disallowed on sale by Pam (7,000) Loss recognized by Pam $0 Loss on Sale to Relative - 3 Price received by Lisa Basis to Lisa Gain realized by Lisa Less Loss Disallowed on sale by Pam Gain recognized by Lisa Loss on Sale to Relative - 4 Price received by Lisa $20,000 Basis to Lisa 10,000 Gain realized by Lisa 10,000 Less Loss Disallowed on sale by Pam (7,000) Gain recognized by Lisa $3,000 Loss on Sale to Relative - 5 Amount realized from disposition less: Adjusted basis of property Realized gain (loss) less: Allowed deferral Recognized gain (loss) Property Disposition 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 Sellers debt assumed by or paid by the buyer Gross sales price is decreased by Effect of Debt Assumption Assumption of debt is treated as a realization of income similar to paying or receiving cash Assumption of the sellers debt increases sales price (as if buyer paid cash) Assumption of debt by the seller decreases the sales price (as if buyer received cash) Types of Dispositions Sale seller receives cash or cash equivalents in return for asset Exchange taxpayer receives property other than cash or cash equivalents in return for property transferred to the other party Involuntary conversion complete or partial destruction due to events not under control of taxpayer...
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This note was uploaded on 03/09/2012 for the course ACCT 4220 taught by Professor Burton during the Spring '08 term at UNC Charlotte.

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T11F-Chp-11-1-Property-Dispositions-2011 - Chapter 11...

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