Tax 4611 notes for week sept 26-30
Tax 4611 notes for week sept 26-30 TAX 4611
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This 2 page Class Notes was uploaded by Lindsay Taylor on Thursday September 29, 2016. The Class Notes belongs to TAX 4611 at East Carolina University taught by Dr. Hagan in Fall 2016. Since its upload, it has received 3 views. For similar materials see Tax For Decision Making in Accounting at East Carolina University.
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Date Created: 09/29/16
Acct 4611 (Tax) Notes week of 9/26-‐30/2016 *highlighted areas are likely test Qs • How are the costs of intangibles recovered? 1. Amortize the cost and match to revenues 2. Goodwill is the biggest intangible; goodwill is the excess over FV that you spend to purchase a business 3. All intangibles are amortized over 15 years except software which is over 2 years • What is the difference between depletion and percentage depletion? 1. Depletion: used for natural resources; buy a plot of land for $100,000 , natural resources on that land are used up (depleted) and I then sell the land for $30,000. So the value of the resources is $70,000. Amortize the $70,000 over life of the resources; what happens when I amortize to the $70,000? I stop depleting àthat’s cost depletion 2. Percentage depletion: every natural resource has an assigned %; if you take oil out of the ground you multiply the assigned % (15% for crude oil) X $Revenue made from the oil to find out how much you have depleted. Even when you reach $70,000, and you still have oil you keep going! But no longer “deplete.” • Distinguish realization and recognition 1. Realized gain: FMV > basis Realized loss: FMV < basis 2. First, you must determine what your realized G/L is Second, is it going to affect you tax return? Third, is the effect immediate? Fourth, you can defer recognizing gains; why would you want to? If it’s an exchange and you have no cash from it, defer! • What is an installment sale? 1. ONLY in seller-‐financed realty Sales $100,000 100% price Adjusted $60,000 60% basis Gain $40,000 40% Gain per New Basis of Note(60%) payment(40%) Down 15,000X40% (100,000-‐15,000)X60%= payment Yr1 $15,000 $6,000 $51,000 Principle 7,000X40% [100,000-‐(15,000+7,000)]X payment Yr2 $7,000 $2,800 60%= $46,800 Principle 5,000X40% [100,000-‐ payment Yr3 $5,000 $2,000 (15,000+7,000+5,000)]X60%= $43,800 • Related Party Rules: If I have a loss I cannot deduct • What is a capital asset? (be specific about capital G/L on test) Everything is a capital asset, except: 1. Inventory 5. Accounts/Notes Receivable 2. Supplies 6. Hedging Transactions 3.Copyright, etc 7. Real or Depreciable Property 4. Commodities 8. Certain U.S. Gov publications • Capital loss limitations individual: $3,000 corporation: $0 • Carry back/ Carry forward Carry back Carry forward Individual N/A forever Xà corporation 3 years 5 years 2
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