reg r2

VECTOR, OH YEAHHHHH

LT prop vs ST prop

LT = cpaital gains tax, ST = ordinary inc

LT = held for over a year

how to determine donee’s basis from donor?

if FMV at date of gift => donors basis, then donee basis = donors basis

if FMV < donor basis, then its the weird but intuitive rule, where NBV is above FMV, and if you sell ABOVE NBV (high part of the line graph) then NBV = basis and thats your gain, if you sell BELOW FMV (low part of line graph) then FMV is your basis and you rec that loss, and if it’s between then no G/L rec’d

holding period for the weird gift stuff above?

sold above NBV?

• use donors holding period

sold below FMV?

• HP begins at date of gift

de minimis safe harbor rule

business has applicable FS:

• ded up to 5k of low cost personal prop items (useful life <12mo)

business doesnt have applicable FS

• ded up to 2.5k

ONLY ded if value of item is under ded amt, else capitalize ENTIRE item

prop converted from personal to business (whats the tax basis?)

lesser of:

• OG cost basis

• FMV of prop at date of conversion

sec. 197 purch’d intangibles

intangibles acquired in connection w/ the purch of a business, a portion of the lump sum pmt is allocated to 197

R&E costs (inside vs outside the US)

inside:

• exp immediately

outside:

• amtz over 180mo

basis for patents and copyrights

obv except that value of inventor’s time is NOT incl

org costs and startup costs (obv)

ofc excl everything that occurs after the official start of operations

TP can exp first 5k of org & 5k of startup, but then reduced d4d when it goes over 50k

costs not exp: amtz’d over 15 yrs

max tax rate for collectibles (works of art, stamps, etc)

max = 28%, considered LT gains

qual. small business stock (QSBS) gain exclusion

big date: JULY 4 2025

if acquired ON or BEFORE that date:

• max exclusion = greater of:

  • 10x TP’s basis or 10m

if acquired AFTER that date:

• max excl greater of:

  • 10x tp’s basis or 5m

net capital loss (ONLY INDIVIDUALS)

3k max ded against ordinary inc, passive inc, or portfolio inc

worthless secs

basis = capital loss

treated as if sold on last day of tax yr

C corp capital loss carryback / CF?

back 3 forward 5

G/L on sale of personal residence:

G:

• 500k is excl of the gain for MFJ / SS

• 250k for S, HOH, MFS

L:

• NONDED

TP must have owned AND used house for 2 of the last 5 yrs

can you ded RPTs?

HELL NAH

wash sales

window: 30d before and after the sale date (this only applies to losses ofc)

basis = purch price of new shares + disallowed loss

acquisition date becomes the new original date

what if you dont take the relevant macrs depr in a given year?

basis still reduced as if you had

MACRS personal prop times (what is 5yr? 7yr?)

5yr

• automobiles, trucks, computers, copiers

7yr

• furniture & fixtures, machinery, equipment

7 lowk looks like an f so the f words are there, also lowk looks like an e(?) so same w/ e words

which macrs props are 200% declining, and which are 150?

200

• 3, 5, 7, 10yr

150

• 15 & 20

half year convention

ONLY applies to personap prop (i.e. not buildings)

take a half year of depr in the year of acquisition & disposal

exception: midquarter convention

midquarter convention

if more than 40% of all of the personal prop placed into service during the year is placed into service in Q4, then treat prop as having been placed into service / disposed of halfway thru the quarter

i.e. disposed of in Q2, so give it 1.5 quarters worth of depr

MACRS real prop

residential:

• straightline over 27.5 yrs

nonresidential:

• SL over 39 years

mid month convention! = ½ month taken in month placed into service, ½ taken when disposed

section 179

• only really applies to personal prop and UPGRADES of real prop.

• MUST be acquired for business, NOT converted

• phased out d4d

• CANT be used to create a NOL (ded is limited to tax inc)

• max ded of 2.56m, reduced after 4.09m

bonus depr

allows for 100% ded for qual prop placed into service!

qual prop:

• 20 yr prop or less

• NOT a rpt

order of depreciations taken

179 → bonus → macrs

alphabetical!

amtzn of intangibles

generally SL using full month convention (full mo taken for disposal and acquisition), amtz’d over 180mo / 15yrs

infinite life? no amtz!

purch’d patents and copyrights & loan issuance costs amtz period

amtz over remaining life