Accounting for Property Transactions

Losses from selling, exchanging, or condemning a personal-use asset, like a car or boat.

Gains from selling, exchanging, or condemning a personal-use asset are generally fully taxable.

The portion of the bond premium that is amortized (reduced) each year to reflect the cost of earning interest from the bond.

Losses from events like theft or damage (casualties) of personal-use assets cannot be used for tax deductions.

The cost of an asset after accounting for depreciation or other adjustments.

This right allows someone to use another's property for specific purposes, like access to a road or utilities.

The difference between the selling price and the adjusted basis of an asset.

This happens when you actually sell something and realize a profit or loss on the transaction. It's the difference between what you paid for it and what you sold it for.

These are realized gains or losses that are included in or deducted from your income, impacting your taxes.

These occur when an asset is sold or otherwise disposed of, resulting in a profit (gain) or a loss.

The original cost of property less any depreciation or cost recovery deductions taken. It reflects the remaining cost basis in the property.

When you get money back for a property that has already been depreciated. Think of it as recovering some of the initial investment you made, and this reduces the remaining basis.

When a casualty or theft occurs, the adjusted basis of the property is reduced by the deductible loss. This loss is usually calculated as the lesser of the fair market value before and after the event, or your adjusted basis in the asset.

Nontaxable distributions from a corporation to its shareholders are treated as a return of capital. This reduces the shareholder's basis in the stock. This implies you are getting some of your investment back.

The amount of insurance received for a casualty or theft loss may reduce the adjusted basis. If the proceeds exceed the adjusted basis, the excess may be treated as a taxable gain. This means you could be taxed on the gain if the insurance was more than what you invested in the property.

The original cost of an asset, typically used to determine its value for tax purposes.

When an employee receives property from their employer at a price lower than its fair market value, it's considered income and must be taxed.

When a shareholder receives property from a corporation at a price lower than its fair market value, it's considered a dividend and must be taxed.

The cost of an asset acquired through a purchase is its fair market value (FMV).

When a taxpayer acquires multiple assets in a single purchase, the total cost must be divided among the individual assets.

The recipient's basis in a gifted property is determined by the date of the gift, the donor's basis, gift tax paid, and the property's fair market value (FMV).

When the property's FMV at the time of the gift is higher than the donor's basis, the recipient inherits the donor's basis. This is called 'carryover basis.'

If the gift's FMV is lower than the donor's basis, different rules apply. The recipient has a "dual basis" for gain and loss, depending on the FMV at the time of the gift and the donor's basis.

Under the cost basis provision for gifts, the recipient's initial basis is 0. This means that any sale of the property will result in a gain equal to the entire amount realized.

The amount of federal gift tax paid on the gift can also affect the recipient's basis in the property.

The total amount received from selling an asset, including cash, property value, mortgages, and loans transferred to the buyer.

The price a willing buyer would pay and a willing seller would accept for an asset, assuming both have full knowledge of the situation.

Costs incurred to enhance an asset's value and extend its useful life, such as major renovations or additions.

Expenses directly related to selling an asset, like commissions or advertising costs.

Events such as sales, trade-ins, casualties, condemnations, thefts, or bond retirements that trigger the calculation of a gain or loss.

Tangible or intangible assets that can be bought, sold, or exchanged. Examples include buildings, vehicles, and trademarks.

The lesser of the fair market value (FMV) at the gift date or the donor's adjusted basis is used to calculate loss when a gifted asset is sold by the recipient. This is called the 'loss basis'.

The holding period of the recipient includes that of the donor when calculating gain on a gifted asset.

The holding period of the recipient starts on the date of the gift when calculating loss on a gifted asset.

If the sale price of a gifted asset falls between the 'gain basis' and 'loss basis', there is no gain or loss realized.

Dividing the purchase price of multiple assets among those assets based on their individual fair market values.

The value of a business that exceeds the value of its identifiable assets. It represents the intangible value of the business, such as brand recognition, customer relationships, and skilled employees.

When a business is purchased, the purchase price is allocated to the individual assets acquired, with any remaining amount assigned to goodwill.

The basis of the original shares is spread out over the original and new shares received in a non-taxable stock dividend, based on the number of shares or their relative fair market values.

The holding period of the original shares continues to apply to the new shares received in a non-taxable stock dividend.

The recipient's gain basis includes the portion of gift tax paid that's related to the asset's appreciation.

The holding period of a gifted asset starts from the date the donor acquired it if the recipient uses the gain basis rule.

The holding period of a gifted asset starts from the date of the gift if the recipient uses the loss basis rule.

The recipient's gain basis, which considers the gift tax paid and the donor's cost, is used to calculate depreciation on depreciable property.

The recipient's basis is the donor's original cost if the asset's value has decreased since the donor bought it.