Wiley CPAexcel Exam Review 2014 Focus Notes: Regulation

Module 36: Transactions in Property

PROPERTY TRANSACTIONS

Realized Gain or Loss

Amount realized

−	Adjusted basis
=	Realized gain or loss

Amount Realized

Cash received

+	FMV of property received
+	Net debt relief
−	Direct selling expenses
=	Amount realized

Net debt relief = Liabilities transferred − Liabilities assumed

Adjusted Basis

Initial basis

+	Improvements
−	Depreciation
−	Costs recovered
±	Adjustments
=	Adjusted basis

Initial Basis
Property converted from personal use to business or investment use to business or investment use	Lower of actual basis or FMV on date of conversion
Inherited property	FMV at date of death or alternate valuation date (date of distribution up to six months after death)
Property received as gift	Gain = Same as donor's basis (transferred basis) Loss = Lesser of (a) gain basis, or (FMV) at date of gift

Sec. 1245 Depreciation Recapture

Applies to the disposition of depreciable personal property (e.g., trucks, autos, machinery, equipment)

Realized gain

−	Depreciation recapture (treated as ordinary income)
=	Section 1231 gain

Amount of depreciation recapture

• Realized gain < accumulated depreciation, use amount of gain
• Realized gain ≥ accumulated depreciation, use accumulated depreciation

Taxation of Gains and Losses

Related-Taxpayer Transactions

Related taxpayers include

• Taxpayer's spouse, brothers, ...