Nonrecog. of Gain / Loss & Cap. Gain / Loss

Nonrecog. of Gain / Loss

  1. Sit. 4 Nonrecog.
    1. T's Position Not Change Much
    2. Good Policy T Not Have 2 Recog. Gain / Loss
  2. Nonrecog. of Exch. 1031
    1. Exch. of Like Prop.
      1. Held 4 investment / prod. 4 use in trade / busi.
      2. Consid. fn. & use 4 det'ing like kind
      3. Time limit
        1. Must desig. prop. w/in 45 days of exch.
        2. Must B bought & turned over in 180 days
      4. Not apply 2 stocks & bonds
      5. Not recog. either 4 gain / loss
    2. Non Like Kind Prop. / Boot
      1. Cash / other prop. exch'ed, recog. gain 2 recipient but not exceed sum of such $ & fair mkt value of prop. 1031)b
    3. Basis
      1. Carry over basis 4 exch'ed prop.
      2. If there's boot, allocate basis btwn like v. non like
      3. Basis 4 exch'ed prop. is basis - boot + recog. gain
      4. Basis of boot is fair mkt value
  3. Nonrecog. of Invol. Conversion 1033
    1. Applies 2
      1. Acts of nat.
      2. Somebody committing tort & recov. $
      3. Condemnation of prop. & compensated / rsbl threat of condemnation
    2. Invol. Conversion of Prop.
      1. Not recog. gain if reinvest proceeds 2 prop. of similar in use / serv. & in fn. w/in 2 yrs.
      2. Recog. 2 extent amt realized on exceeds cost
      3. Carry over basis 1033)b
  4. Qualified Small Busi. Stock 1045
    1. Carry Over Basis
    2. Held 4 6 Mo's
  5. Marriage & Divorce
    1. Transf's Btwn Spouse / Divorcees 1041
      1. Gifts so no recog. of gain
      2. Anything w/in 1 yr. is incident 2 divorce
      3. Carry over basis
  6. House 121
    1. Not Recog. Gain from Home Sale
      1. Excl. perm'ly $250k / person if T's princ. res. 2 out of 5 yrs. before sale
    2. Not Recog. Loss Deduction
    3. Disadv's 2 Renters & Home Offices

Cap. Gain & Loss

  1. Pref. Cap. Gain Treatment
    1. Mechanics of Cap. Gain & Loss 1222
      1. If hold more than 1 yr., long term cap. gain
      2. All short term cap. gain + all short term cap. loss = net short term cap. gain / loss
      3. All long term cap. gain + all long term cap. loss = net long term cap. gain / loss
      4. Net long term cap. gain - net short term cap. loss = net cap. gain which gets pref. treatment
  2. Cap. Assets
    1. Def. of Cap. Asset 1221: T's Prop. Except
      1. Inventory / prop. 4 sale 2 customers,
      2. Copy rt., lit., etc. created by pers'al effort
      3. Acct's receivable in trade / busi.
      4. Pub. of US govt
      5. Prop. used in trade / busi. subj. 2 depreciation / real prop. in trade / busi.
        1. Could B cap. asset if more gain than loss 1231
        2. If loss exceeds gain, then ord. loss 1231
    2. Det'ing Cap. Asset
      1. Should label prop. 4 investment v. not ( 1236 4 sec. dealers)
      2. If hold real prop. 4 investment, safe harbor if hold 5 yrs., subdiv. w/o maj. improvement, & not in real estate 1237
      3. Future K's
    3. Jud'al Exceptions of Not Cap. Assets
      1. Not cap. asset if rent is ord. income in cancelling lease & getting $
      2. Collapsible corp. where paid 4 compensation in buying stock 4 corp.
      3. Using image by licensing / selling, then not cap. asset
      4. Future K's 4 inventory / integral part of what corp. is doing, not cap. asset
  3. Recapture
    1. Depreciable Tangible Prop.
      1. To extent T sells asset, gain attributable 2 depreciation deduction treated as ord. income 1245
    2. Depreciable Real Prop.
      1. To extent depreciation exceed accelerated depreciation 1250 but now use straight line so not applicable anymore
  4. Limited Loss Deductibility 1211

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December 8, 1997

Ms. Haeji Hong
1