| Title: |
Form 1040: Gains and Losses From Sale of Property |
| Prerequisite: |
Overview of Federal Income Taxation or comparable knowledge/experience |
| Advance Preparation: |
None |
| Knowledge Level: |
Intermediate |
| Subject Matter Area: |
Taxes |
| Date of Publication: |
October 2009 |
| Copyright © |
2009 by Bisk Education, Inc. All rights reserved. |
| Recommended CPE Credits: |
4 QAS/Registry (50-minute hour) |
| Expiration Date: |
One year from date of receipt to complete program and submit quizzer to obtain credit |
| Passing Grade for Quizzer: |
70 percent or higher |
The basic IRC §1001 formula is "amount realized less adjusted basis" equals "gain realized" (or "loss realized"). The gain realized is not necessarily the amount taxed; only the "gain recognized" is taxable. Tax law, however, provides that all gain realized is to be recognized, unless a specific exclusion applies.
Although this program will refer only to gain, the same rule also applies to loss. A major difference between the treatment of gains and losses is that losses from the sale or exchange of property not used in a trade or business or held for investment are generally not deductible. Losses from casualties and thefts are deductible as itemized deductions subject to a $100-per-event floor ($500 for 2009) and a 10-percent-of-AGI floor. Gains, on the other hand, are generally taxable unless specifically exempted.
IRC §1231 gains and losses are initially reported on Form 4797, Sales of Business Property. If there is a net IRC §1231 gain, it is treated as an ordinary gain to the extent of net IRC §1231 losses recognized in the previous five years that have not previously caused a net IRC §1231 gain to be treated as an ordinary gain. Any remaining net IRC §1231 gain is treated as though it were a long-term capital gain. The portion of the net IRC §1231 gain that is treated as a long-term capital gain is carried to Schedule D of Form 1040, where it is combined with any capital gains or losses.
This program examines the compliance issues associated with the reporting of gains and losses from the sale of property by an individual taxpayer with particular focus on Schedule D of Form 1040. This program includes expert analysis by E. Lynn Nichols, CPA, and John L. Norman, Jr., JD, on audio and video.
Use of Materials
Audio or DVD
The user should begin by watching the DVD segment or listening to the audio CD for the chapter before reading the text. The user may wish to make notes of the most important concepts and any terms that are new. Next, the user should review the learning objectives at the beginning of the chapter and read the chapter. The user should work through each of the examples. It may be helpful to highlight important material and/or to make additional notes. Next, the user should complete the study questions at the end of the chapter and review the answers. If the user answers a study question incorrectly, s/he should review the section of the text that is indicated at the end of the explanation to the study question to assure comprehension of the material. The user should review the learning objectives once more to consider achievement of the objectives. After the user has finished watching the DVD or listening to the audio CDs and reading the text and working through the study questions, s/he may wish to review her/his notes and any sections of the text or DVD or audio CDs that were difficult. When the user is ready, s/he should complete the quizzer. Reviewing notes periodically will increase retention of the material.
Online
The user should begin by watching the streamed video segment, if any, or listening to the streamed audio segment, if any, for the chapter before reading the text. The user may wish to make notes of the most important concepts and any terms that are new. Next, the user should review the learning objectives at the beginning of the chapter and read the chapter. The user should work through each of the examples. After the user has studied each chapter, s/he should click on the link at the left to complete the interactive study questions. If the user answers a study question incorrectly, s/he should review the section of the text that is indicated at the end of the explanation to the study question to assure comprehension of the material. The user should review the learning objectives once more to consider achievement of the objectives. After the user has finished watching the streamed video, if any, or listening to the streamed audio, if any, and reading the text and working through the study questions, s/he may wish to review her/his notes and any sections of the text or video/audio, if any, that were difficult. When the user is ready, s/he should click on the link to the left to complete the quizzer. The user's CPE certificate will be provided immediately upon successful completion of the quizzer.
This program is divided into fourteen (14) chapters.
Chapter 1 introduces "adjusted basis" and includes discussions of cost basis, transfer of basis, estate of a decedent, and tax-free exchanges.
Chapter 2 takes a brief look at the meaning of "amount realized."
Chapter 3 deals with the tax-free exchanges of like-kind property, including the measurement of basis, losses, exchanges between related parties, and deferred exchanges.
Chapter 4 examines the tax treatment of property that has been involuntarily converted, including the basis rules, losses, condemnation of residential property, related party prohibition, and disaster-related involuntary conversions.
Chapter 5 addresses the rules governing the sale of a principal residence, such as partial exclusion of gain and compliance.
Chapter 6 explores the tax treatment of installment sales, including dealer dispositions, the effects of the installment method, and compliance.
Chapter 7 focuses on special rules for dealings in securities, including wash sales, worthless securities, and short sales of stock.
Chapter 8 covers the general rules and exceptions governing constructive sales of appreciated financial position.
Chapter 9 examines the character of gain or loss on the sale or exchange of property, including discussions of the definition of capital asset, conversion transactions, compliance matters, and the capital gain exclusion for small business stock.
Chapter 10 deals with the tax treatment of capital losses, including capital loss carryover and passive activity.
Chapter 11 addresses property transactions subject to the IRC §1231 rules.
Chapter 12 explores depreciation recapture of IRC §1245 property, IRC §1250 property, and IRC §280F property.
Chapter 13 focuses on related party transactions, including tax implications, definitions, transfers in a controlled group, transfers incident to divorce, installment sales between related parties, and replacement property in an involuntary conversion.
Chapter 14 closes out the program with a look at various characterization provisions involving such transactions as dealer sales and losses on the sale of small business stock.
Helpful Guidance
Throughout this program, the user will find explanations and discussions regarding some of the issues that often face practitioners. In order to enhance the user's comprehension of the material and highlight important practical considerations, this program includes the following designations:
A Biskalert is intended to warn the practitioner of a particular situation that may require action or other consideration by the client or the practitioner on behalf of the client.
A Biskplan offers a strategy/discussion point when a practitioner is faced with a particular issue or situation.
A Biskpoint presents analysis or commentary that attempts to explain or clarify authoritative guidance.
A Bisktip provides practical advice that may be used to help improve client service or service to the practitioner's organization.
Stephen T. Galloway, JD, joined Bisk Education, Inc., as a tax editor in 1991 and has served as Vice President and Managing Editor since 1995. He is responsible for all content development in the CPA Review and Continuing Professional Education product lines, as well as all audio and video operations of Bisk Education, Inc. Mr. Galloway's background includes more than a decade of legal and public accounting experience, mostly in the tax and litigation services groups of Coopers & Lybrand, LLP (now PricewaterhouseCoopers, LLP). He has authored several books and monthly publications in the area of taxation, as well as produced numerous audio and video programs in taxation, accounting and auditing, and graduate-level business administration. Mr. Galloway earned his undergraduate degree in Social and Behavioral Sciences from The Johns Hopkins University and his Juris Doctorate from University of Maryland School of Law. (Author)
Edward K. Zollars, CPA, is a partner in the firm of Thomas and Zollars, CPAs, in Phoenix, Arizona. A former member of the AICPA Tax Section Tax Technology Committee, Mr. Zollars specializes in individual and business tax planning, as well as tax technology. He has been an expert speaker at numerous AICPA Tax Section meetings and has made presentations at the AICPA National Conference on Federal Taxes. (Contributing Author)
John L. Norman, Jr., JD, is an attorney in private practice in Washington, D.C., where he specializes in closely held business organizations, as well as estate and financial planning. He is the former National Director of Taxation for the accounting firm Pannell Kerr Forster, and the former chair of PKF's International Tax Committee. He is also a member of the International Tax Planning Association. Previously, he was the Director of Tax Policy for Potomac Electric Power Company. He also taught at Keller Graduate School of Management, College of William and Mary, and George Washington University. Mr. Norman is a noted speaker and author of several publications in the area of federal taxation and a regular contributor to Bisk Education's CPE Network. (Contributing Author and Speaker)
E. Lynn Nichols, CPA, a practicing CPA for more than 35 years, is the founder of Mares Nichols CPE, Inc., a developer of continuing education programs and practice aids for CPAs. He is a regular contributor to CPE Network, a member of the Board of Visitors of the School of Accounting in the College of Business of the University of Oklahoma and a former member of the Editorial Board of the Ohio CPA Journal. In 2005, Mr. Nichols was honored by the Ohio Society of CPAs with its Gold Medal for Meritorious Service to the Accounting Profession. In 2008, he was selected by the Ohio Society of CPAs as one of Ohio's outstanding CPAs. Mr. Nichols serves as an advisor to CPA firms across the U.S. on matters of federal income taxation, litigation services, and IRS procedures. He has authored more than 20 highly rated tax CPE programs and his Current Federal Tax Developments program is always among the highest rated in the nation. (Speaker)