T11F-Chp-12-1-Non-Recognition-Transactions-2011

T11F-Chp-12-1-Non-Recognition-Transactions-2011 - Chapter...

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Chapter 12 Non-Recognition Transactions-Fall 2011 Howard Godfrey, Ph.D., CPA UNC Charlotte Copyright © 2011, Dr. Howard Godfrey Edited November 4, 2011. T11F-Chp-12-1-Non-Recognition-Transactions-2011
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12. Nonrecognition Transactions Rationale for Nonrecognition Commonalities of Nonrecog. Trans. Like-Kind Exchanges Exchange Requirement Like-Kind Property Requirements Effect of Boot Related Party Exchanges Carryover of Tax Attributes Involuntary Conversions Involuntary Conv. Gains and Losses Qualified Replacement Property Sale of a Principal Residence Summary
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1. Basics of Tax- Deferred Exchanges
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Rationale for Nonrecognition Commonalities of Nonrecog. Trans.
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Concept Review Under all-inclusive income and realization concepts, gains should be recognized as taxable only if realized. A realized gain or loss on disposition of property may be deferred from recognition . Recognition is postponed, not forgiven.
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Concept Review Substance-over-form doctrine accepts that a trade of assets between taxpayers is a continuation of the asset If taxpayers have a continuation of assets, they do not have the wherewithal-to- pay tax
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Similarities All amounts realized must be reinvested Gains are deferred, not losses Exception for like-kind exchanges Gain recognized is never more than gain realized
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Similarities Deferral is accomplished through basis adjustment Basis of replacement property is decreased by deferred gains Basis of replacement property is “sometimes” increased by deferred losses Tax attributes carryover to replacement property
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Similarities Net proceeds received $ XXX Less: Adjusted basis ( XXX) Realized gain $ XXX Were all or part of net proceeds reinvested in a qualifying replacement property? Gain is recognized Yes No
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Similarities Yes Check amount of net proceeds reinvested Net proceeds fully invested Net proceeds not fully invested No gain recognized Gain recognized on net proceeds not reinvested Basis of replacement property = FMV of property - Deferred gain
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2. Like-Kind Exchange s and
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Like-Kind Exchanges Exchange Required Like-Kind Property Effect of Boot Related Party Exchanges Carryover-Attributes
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Value received: Cash received Other assets received Decrease in our debt Total value received Basis Given: Cash given Other assets given Increase in our debt Total basis given Gain realized Gain Recognized Formula for Gain or loss
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Basis - New Asset Amount Basis of Old Asset Add: Boot Paid Less: Boot Received Add: Gain Recognized Less: Loss Recognized Basis - New Asset
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Basis - New Asset- Method 2 Amount FMV of Asset Received Less: Gain not Recognized Add: Loss not Recognized Basis - New Asset Loss is recognized in some transactions.
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FMV of Prop. Received minus: Deferred Gain plus: Deferred Loss equals: New Basis Like-Kind Exchanges Basis of Property Received
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A tax-deferred exchange postpones gain or loss recognition to the future by adjusting basis of the asset acquired The longer gain recognition can
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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-12-1-Non-Recognition-Transactions-2011 - Chapter...

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