ACC 380 Final Exam Memorization Guide

Vocabulary practice flashcards covering tax authorities, recovery periods, §179 expensing, MACRS conventions, depreciation recapture, §1231 netting, and home ownership tax rules for the ACC 380 final exam.

General statute of limitations

The period within which the IRS can assess tax, running $3\,\text{years}$ from the later of the actual filing date or the original due date of the return.

Statute of limitations for fraud

An unlimited assessment period with no time limit, allowing the IRS to assess tax at any time for a fraudulent return.

Primary tax authority

Official sources of tax law categorized as statutory (Constitution, Internal Revenue Code, tax treaties, committee reports), judicial (court decisions), or administrative (IRS and Treasury pronouncements).

Secondary tax authority

Unofficial interpretations of tax law such as tax research services (RIA Federal Tax Coordinator), tax articles, newspaper stories, IRS publications, the CCH Master Tax Guide, and textbooks.

Final regulations

The official Treasury interpretation of the Internal Revenue Code that represents the highest administrative authority.

Temporary regulations

Regulations issued without public comment that carry the same authoritative weight as final regulations while in effect.

Proposed regulations

Administrative guidance issued by the Treasury for public comment that is not legally binding.

Revenue rulings

Official IRS pronouncements that provide detailed analysis by applying the tax law to a specific fact pattern; they have less weight than Treasury regulations.

Revenue procedures

Official IRS statements that explain internal IRS practice and procedural rules.

Private letter rulings

Tax guidance with the most specific focus and least authoritative weight, binding the IRS only for the requesting taxpayer with no precedential value for others.

Stare decisis

The judicial doctrine dictating that courts must rule consistently with their own prior rulings and decisions from higher courts.

Golsen rule

The legal rule requiring the U.S. Tax Court to follow the precedent of the specific Circuit Court of Appeals that has appellate jurisdiction over the taxpayer.

16th Amendment

The constitutional amendment authorizing Congress to lay and collect taxes on income from any source without apportionment among the states.

Personal property

Any tangible property that is not real estate, including assets such as machinery, computers, furniture, and cars.

Personal-use property

Property used for non-business, personal purposes (such as an individual's personal car or residence); losses on sale or disposition are not deductible.

Business-use property

Property utilized in a trade or business that is depreciable, with the exception of land.

Real property

Land and permanent structures/buildings; land itself is never depreciable.

Capital asset (§1221)

Property held for investment or personal use, explicitly excluding inventory, accounts receivable, and depreciable property or land used in a trade or business.

§1231 asset

Depreciable property and land used in a trade or business that has been held for more than $1\,\text{year}$.

Half-year convention

The default MACRS convention treating personal property as placed in service or disposed of at the exact midpoint of the tax year.

Mid-quarter convention

The required MACRS convention when more than $40\%$ of the total personal property basis placed in service during the year is placed in service in the fourth quarter (Q4).

Mid-month convention

The mandatory MACRS convention for real property that treats assets as placed in service or disposed of at the midpoint of the relevant calendar month.

Qualified improvement property

Interior improvements to nonresidential real property classified under MACRS as $15\text{-year}$ property using straight-line depreciation and the half-year or mid-quarter convention.

§179 immediate expensing

An elective deduction allowing immediate expensing of qualifying tangible personal property up to $\$2,560,000$ in 2026, subject to a dollar-for-dollar phase-out above $\$4,090,000$ and a business income limit.

Bonus depreciation

An automatic depreciation deduction (unless elected out by property class) providing $100\%$ write-off for new or used property with a recovery period of $20\,\text{years}$ or less acquired after Jan. 19, 2025, which can create a net operating loss.

§197 intangibles

Purchased intangible assets (such as goodwill, customer lists, and patents acquired with a business) that must be amortized straight-line over $180\,\text{months}$ ($15\,\text{years}$) using a full-month convention.

Amount realized

The total value received in an asset disposition, calculated as: $\text{Cash} + \text{FMV of other property} + \text{Liabilities assumed by buyer} - \text{Selling expenses}$.

Adjusted basis

The tax basis of an asset reflecting cost minus cost recovery, defined as: $\text{Original cost} - \text{Accumulated depreciation (allowed or allowable)}$.

§1245 depreciation recapture

A tax rule recharacterizing recognized gain on depreciable personal property as ordinary income up to the lesser of the realized gain or accumulated depreciation.

§1231 look-back rule

A provision recharacterizing current net §1231 gain as ordinary income to the extent of unrecaptured net §1231 losses taken in the prior $5\,\text{years}$.

Installment sale

A disposition of property where at least one payment is received after the tax year of sale, requiring all §1245 depreciation recapture to be recognized immediately as ordinary income in the year of sale.

Gross profit percentage

The fraction used in installment sale reporting to determine taxable gain per payment, defined as: $\frac{\text{Gross Profit}}{\text{Contract Price}}$.

§121 exclusion

A tax provision allowing taxpayers to exclude up to $\$250,000$ (single) or $\$500,000$ (married filing jointly) of gain on the sale of a principal residence.

§121 ownership test

A prerequisite for the home sale gain exclusion requiring ownership of the residence for at least $2$ of the $5\,\text{years}$ ending on the date of sale (satisfiable by either spouse for married couples).

§121 use test

A prerequisite for the home sale gain exclusion requiring use of the property as a principal residence for at least $2$ of the $5\,\text{years}$ ending on the date of sale (must be satisfied by both spouses to claim the $\$500,000$ exclusion).

Residence test (vacation home)

A statutory standard classifying a home as a residence if personal-use days exceed the greater of $14\,\text{days}$ or $10\%$ of the rental days; otherwise, it is classified as a nonresidence (rental).

Acquisition indebtedness

Debt secured by a qualified principal or secondary residence that is incurred to acquire, construct, or substantially improve that residence.

Point (mortgage)

A prepaid finance fee charged by a lender equal to $1\%$ of the loan principal.

Itemized deduction limit on taxes

The overall annual cap limiting itemized deductions for state and local taxes, including real property taxes, set at $\$40,400$ for 2026.