EA2 - Study Unit 6 - Basis and Property Transactions

The basis for depreciation is the lesser of the FMV at conversion or adjusted basis. In this case, it is calculated as $180,000.

If property is converted involuntarily, gain may be deferred if the proceeds are reinvested in similar property.

In a like-kind exchange, gain recognized is the growth from boot received, which cannot exceed realized gain.

The adjusted basis includes original cost, improvements, but subtracts losses. It’s crucial for calculating depreciation.

A transaction where similar properties are exchanged without recognizing gain, unless boot is received.

Cash or nonqualified property received in an exchange; affects gain recognition.

The basis of the new property after an exchange is the adjusted basis of the old property plus recognized gain, minus any boot received.

A deduction for unreimbursed losses due to disaster; it decreases the property basis.

Costs incurred to improve the property, which must be capitalized and added to the basis.

Legitimate expenses such as legal fees or improvements increase the basis, while routine maintenance does not.

An easement is a right to use property; it does not increase the basis of the property.

In a like-kind exchange, gain may not need to be recognized if reinvesting in similar property.

The basis of inherited property generally equals its fair market value at the date of death.

Cash received reduces recognized gain; market value aids in determining the value of properties exchanged.

The period at which property must be replaced after involuntary conversion to defer gain.

Legal fees incurred to defend property title are capitalized and increase the basis of the property.

In a like-kind exchange, the gain recognized is limited to the smaller amount of boot received or realized gain.

Changes in the basis of property can arise from various factors, including improvements and deductible losses.

Allows for nonrecognition of gain or loss on exchanges of like-kind property in investment or business use.

Capital expenses like rewiring or renovations must be capitalized, while repairs are typically not.

Costs associated with exchanges can reduce the amount of gain recognized.

Cash or other nonlike-kind property received can impact the calculation of gain on an exchange.

The new basis after a like-kind exchange is constructed from the adjusted basis plus gain, minus certain values.

Exchanges involving cash or other nonqualified properties, where some gain is realized but not recognized.

Require that certain indirect costs, including taxes, must be capitalized when purchasing or producing property.

Total cost of improvements includes all capital and significant renovations made to a property.

For business assets, basis adjustments include capital expenditures minus depreciation taken.

A tax treatment allowing repairs under $2,500 to be expensed.

Certain routine repairs can be expensed rather than capitalized if they meet specific criteria.

Basis may increase due to liabilities secured by property, extending its life.

Basis must be reduced by the greater of allowed or allowable depreciation.

Allows up to $1,160,000 of business asset cost to be expensed in 2023.

A shareholder's contribution to capital does not generate recognized gain but increases stock basis.

In a nontaxable stock distribution, basis is allocated based on fair market value of original and new stocks.

Basis of the new property after an exchange adjusts from the old property’s basis plus any gain.

The assigned value of property at any given time for tax purposes.

The total of all capitalized acquisition costs, including the FMV of property given up.

Basis derived from the basis in another property referenced during a transaction.

Computed by reference to the basis of the same property in the hands of another owner.

Basis calculated based on the basis of previously held property that is exchanged.

The basis of personal-use property when converted to business use, taken as the lower of its basis or FMV on conversion date.

A defined grouping of functionally interdependent components analyzed for tax purposes.

Costs that are added to the basis of an asset rather than expensed immediately.

Substantial enhancement of a property that adds value; capitalized.

The basis includes the purchase price plus any mortgage assumed.

Painting costs are capitalized if part of a larger improvement project, otherwise expensed.

Additional costs like appraisal fees, freight, and installation that can be capitalized.

Taxes incurred before acquiring a property that are added to the basis.

Fees associated with a purchase, like attorney fees and recording fees, are capitalized.

Legal fees that defend property title are added to the asset's basis.

For converted property, it's the lesser of FMV or adjusted basis at conversion.

Gain recognized is zero if proceeds are reinvested in similar property.

Cash or nonqualified property that can trigger gain recognition.

Basis = adjusted basis of old property + gain recognized - boot received.

Easements do not increase the basis of depreciable property.

Recognized gain is the lesser of boot received or realized gain.

Properties must be similar in nature but not necessarily in quality.

Nonrecognition of gain applies if replacement property is similar.

Legal fees and improvements increase property basis.

Costs must be capitalized if they materially enhance value.

Gain on stock equals FMV minus adjusted basis.

Received cash is treated like additional assets, affecting gain recognition.

Capitalized costs increase basis, while daily maintenance does not.

Gain only recognized to the extent of boot received, if any.

Relief from mortgage is akin to receiving cash; adds to recognized gain.

The replacement basis is the cost of new property, ignoring insurance recoveries.

Recognized gain is limited to cash and liabilities relieved in exchange.

Total value minus basis may suggest potential gain, but not always recognized.

Painting costs may be capitalized based on context of improvement.

Assessed construction costs increase property basis.

Inherited property usually has a basis equal to FMV at decedent's death.

The basis includes cash received and liabilities assumed when calculating realized gain.

Certain legal fees incurred are capitalized and can increase property basis.

Cost of major improvements enhances the property's basis significantly.

Receiving boot decreases the realized basis of exchanged property.

Expenses incurred during an exchange can reduce gain but are capitalized.

Cash received in property transactions can affect recognized gain.