TAILIEUCHUNG - Lecture Fundamentals of taxation 2014 (7/e) - Chapter 7: Capital gains and other sales of property

Chapter 7: Capital gains and other sales of property, when you have completed this chapter, you should understand the following learning objectives: Define the terms and identify the tax forms used in sales of property transactions; classify assets sold as ordinary assets, § 1221 capital assets, or § 1231 business assets; explain and apply the tax rules for recognizing gains or losses on the sale of ordinary assets;. | Chapter 7 Capital Gains and Other Sales of Property “If a client asks in any but an extreme case whether, in your opinion, his sale will result in capital gain, your answer should probably be, ‘I don’t know, and no one else in town can tell you.’” -- James L. Wood 1 LO #1 Terms & Tax Forms Basis of property purchased is the cost of the asset including cash, debt obligations, and other property or services included in acquiring the asset. Basis of assets transferred by inheritance are valued at the FMV of the property at the date of death or FMV on the alternate valuation date if an estate return is being filed and the estate income is reduced by the valuation. 7-2 Before a gain or loss can be determined, the taxpayer must first know the basis of the property involved in the transaction. Basis is the cost of the asset including cash, debt obligations, and other property or services included in acquiring the asset. There are special situations where basis may not be the original cost. Assets transferred by inheritance are valued at the Fair Market Value (FMV) of the property at the date or death or alternate valuation date. LO #1 Terms & Tax Forms Basis of property transferred to a taxpayer from a spouse or former spouse incident to a divorce settlement, is the same as the spouse’s or former spouse’s adjusted basis before the transfer. Assets transferred by gift can be valued at FMV or basis of the donor depending if the FMV is basis. 7-3 The basis of property transferred from a spouse or former spouse incident to a divorce settlement is the same as the spouse or former spouse’s adjusted basis before the transfer. Assets transferred by gift can be valued at the fair market value or basis. This is important when calculating a gain or loss on the subsequent sale. This is covered later in the chapter. LO #1 Terms & Tax Forms Adjusted basis is the cost of the asset less any accumulated depreciation. The difference between the amount realized from the sale and .

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• Fundamentals of taxation
• Lecture Fundamentals of taxation 2014
• Gross income
• Capital gains
• Sales of property
• Classifying assets
• Partnership taxation
• Partnership formation
• Separately stated items
• Corporate taxation
• Taxable income
• Tax liability
• Tax refunds
• Leture Fundamentals of Taxation
• Income tax formula
• Regressive tax structures
• Average tax rates
• Tax payments
• Tax formula
• Dependency exemptions
• Internal revenue service
• Income recognition
• Social security benefits
• Adjusted gross income
• Adjustments for adjusted gross income
• Health savings account
• Itemized deductions
• Deductible medical expenses
• Local tax deductions
• Self employed business income
• Business expenses
• Business assets
• Flow through entities
• Rental property
• Tax credits
• Dependent care expenses
• Calculate the credit
• Payroll taxes
• Federal tax calculations
• Paying payroll taxes
• Tax deferred plans
• Employer sponsored plans
• Simplified employee pensions
• Special property transactions
• Like kind exchange rules
• Report involuntary conversions
• Passive activity loss rules
• Individual alternative minimum tax
• At risk rules
• Expanded tax formula
• Proper filing status
• Tax purposes