1. Sales and Basis of assets Presented by: tom o’saben ea
Michigan NATP
Sales and Basis of assets
Presented by: tom o’saben ea

2. Sales and Basis Topics Sale of Home and general home ownership issues
Basis reduction following discharge of indebtedness
Form 4797
Repairs vs capitalization and the de minimis safe harbor election
Correcting missed depreciation
Asset sale vs stock sale: what’s the difference?
Partners adjusted basis vs shareholders adjusted basis
Basis words and wisdom via the irs pubs

3. Sale of home issues starts on page 1
Have we become too complacent with the $250k/$500k exclusion under §121?
Let’s revisit the deductibility of interest limitations as well as the other questions on page 1
The issue may be far deeper than who can deduct what interest
Who owns the home?

4. Sale of home (cont’d)
What constitutes “equitable” owner of a house? (page 2)
What is that interest limitation?
Does it depend on how the home is owned or where it is owned?
Maybe—see page 4
Does sophy tells us its better not to be married? (page 5-6)

5. Sale of home (cont’d) Second home tax traps (page 7)
2008 congress changed the rules
Periods of non qualified use must be considered
See example on page 8

6. Taxes in converting rental property to personal residence page 8
Revisiting the §121 exclusion limits
Example on page 9
Recapture of depreciation
Allowed or allowable

7. Home office deduction and basis issues: standard or simplified(
Home office deduction and basis issues: standard or simplified(?) page 9
Rules to follow…..

8. What about converting my home to rental and then selling it two years later……

9. Disposal of rental property with suspended passive losses
The story of bob and mary on page 10
Before we tell the tale, why are losses suspended?

10. Basis reduction following discharge of indebtedness page 19
does getting out of repaying borrowed funds carry with it an inherit tax benefit?
What are our basis issues here?

12. Form 4797 begins on page 27
Certainly we have some basis issues here don’t we?
My goal is to convert the knowledge you already have and to remove the fear of the form 4797 by convincing you that you already know the answers you need…….convinced?

13. When 4797 is used…

14. When 4797 is used

15. When 4797 is used

16. When 4797 is used

17. Most common used code sections with 4797

19. Recapture provisions…

20. What’s treated as depreciation?

21. Depreciation recapture

22. §1250 property

23. §1250 property: 3 potential tax treatments

24. Reporting transactions on form 4797

25. Reporting transactions on form 4797

26. Recapture of previous §1231 losses page 36

27. Form 4797 part ii

28. Form 4797 part iii example

29. Form 4797 part iii example

30. Form 4797 part iv

31. Form 4797 part iv
Is my 2-year-old computer, stored in a file cabinet, and only brought out to retrieve old records, still be used more than 50% for business?

32. Form 4797 part iv example

33. Form 4797 part iv observations
Difference between §179 claimed and regular depreciation is reported where original §179 deduction was claimed
Likely Schedule C or F, has potential S/E tax impact
Income recapture amount restores that amount of basis to the asset
Restored basis is depreciable

34. Depreciation recapture on like kind exchanges page 55
Could the sale of land have depreciation recapture??

35. Depreciation recapture on installment sales page 61

36. Disposition of section 179 property by a pass through entity page 65
Watch for the supplement to the k-1
The income from the section 179 disposition is not on the front of the k-1

37. Repair v cap and the 4797 page 68
Asset purchases of $2,500 of less treated as de minimis materials and supplies
What happens upon disposition:
Ordinary income?
Back to whence the deduction came?
Do nothing?
Guidance seems to conclude that we do use Form 4797 but Part II meaning ordinary income treatment for the full sales price, no capital gain treatment for any part of the sale proceeds.

38. Final repair regs vs sec 179 and bonus depreciation page 76

39. Let’s also discuss cost segregation studies (nib)
What’s the goal?
Quicker depreciation?
Segregation of assets among a given class life?
Retiring of assets or components within a given class life?

40. Form 3115 missed depreciation an natp white paper page 84
How to become a hero to your client while making them comply with allowed or allowable…..

41. Let’s work through our example on the most up to date form 3115---page 97

42. Asset sale vs stock sale: what’s the difference? Page 105
Buyers viewpoint
Sellers viewpoint
Stock sale

43. Partner’s stock basis vs shareholder’s stock basis pages 108-109

44. Running the bases aka “who’s on first” when it comes to deductibility of losses (nib)
Basis
At risk
Passive activity

45. Basis: the irs words and wisdom page 112
Basis begins with cost
Capitalized costs go into basis
Remember the non deductible home mortgage interest?

46. Sale of stocks and mutual funds page 114
Question is: what did you sell?
If the answer is “ I don’t know” then likely you will be reporting on average cost basis

47. Uniform capitalization rules page 117

48. Deducting vs capitalizing costs page 123
Is the work a repair or improvement?
Let’s go back to the b.a.r.

49. Basis other than cost page 130
Property received for services
Bargain purchases
Taxable exchanges
Involuntary conversions
Non taxable exchanges
Like-kind exchanges

50. Property received as a gift page 138
You need to know the adjusted basis in the hands of the donor and the fair market value at the time it was given to you
Fmv less than donor’s adjusted basis
Gain or loss?
For gain basis = donor’s basis
For loss basis = fmv at time of gift
Donor’s basis for a loss = no gain or loss

51. Basis in inherited property page 141
Fmv on date of death or alternate valuation date
Except in 2010
Property held by surviving tenant
Qualified joint interest
Tenant by the entirety
jtwros

52. Property changed to business or rental use page 144
Basis for depreciation = the lesser of
The fmv on the date of change or
Your adjusted basis on the date of change