DOCSLIB.ORG

Internal Revenue Service, Treasury § 1.1034–1

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Internal Revenue Service, Treasury § 1.1034–1 Internal Revenue Service, Treasury § 1.1034–1 control of a corporation described in no investment in a new residence, sec- section 1033(a)(2)(A). tion 1034 is inapplicable and all of the gain shall be recognized. Whenever, as (Secs. 1033 (90 Stat. 1920, 26 U.S.C. 1033), and 7805 (68A Stat. 917, 26 U.S.C. 7805)) a result of the application of section 1034, any or all of the gain realized on [T.D. 6500, 25 FR 11910, Nov. 26, 1960; 25 FR the sale of an old residence is not rec- 14021, Dec. 31, 1960. Redesignated and amend- ed by T.D. 7625, 44 FR 31013, May 30, 1979; 44 ognized, a corresponding reduction FR 38458, July 2, 1979. Further redesignated must be made in the basis of the new and amended by T.D. 7758, 46 FR 6925, Jan. 22, residence. The provisions of section 1981; T.D. 7758, 46 FR 23235, Apr. 24, 1981; T.D. 1034 are mandatory, so that the tax- 8121, 52 FR 414, Jan. 6, 1987] payer cannot elect to have gain recog- nized under circumstances where this § 1.1033(h)–1 Effective date. section is applicable. Section 1034 ap- Except as provided otherwise in plies only to gains; losses are recog- § 1.1033(e)–1 and § 1.1033(g)–1, the provi- nized or not recognized without regard sions of section 1033 and the regula- to the provisions of this section. Sec- tions thereunder are effective for tax- tion 1034 affects only the amount of able years beginning after December 31, gain recognized, and not the amount of 1953, and ending after August 16, 1954. gain realized (see also section 1001 and (Secs. 1033 (90 Stat. 1920, 26 U.S.C. 1033), and the regulations issued thereunder). 7805 (68A Stat. 917, 26 U.S.C. 7805)) Any gain realized upon disposition of other property in exchange for the new [T.D. 6500, 25 FR 11910, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960. Redesignated and amend- residence is not affected by section ed by T.D. 7625, 44 FR 31013, May 30, 1979. 1034. For special rules relating to the Further redesignated and amended by T.D. sale or exchange of a principal resi- 7758, 46 FR 6925, Jan. 22, 1981] dence by a taxpayer who has attained age 65, see section 121 and paragraph § 1.1034–1 Sale or exchange of resi- (g) of § 1.121–5. For special rules relat- dence. ing to a case where real property with (a) Nonrecognition of gain; general respect to the sale of which gain is not statement. Section 1034 provides rules recognized under this section is reac- for the nonrecognition of gain in cer- quired by the seller in partial or full tain cases where a taxpayer sells one satisfaction of the indebtedness arising residence after December 31, 1953, and from such sale and resold by him with- buys or builds, and uses as his principal in 1 year after the date of such reacqui- residence, another residence within sition, see § 1.1038–2. specified time limits before or after (b) Definitions. The following defini- such sale. In general, if the taxpayer tions of frequently used terms are ap- invests in a new residence an amount plicable for purposes of section 1034 at least as large as the adjusted sales (other definitions and detailed expla- price of his old residence, no gain is nations appear in subsequent para- recognized on the sale of the old resi- graphs of this regulation): dence (see paragraph (b) of this section (1) Old residence means property used for definitions of adjusted sales price, by the taxpayer as his principal resi- new residence, and old residence). On the dence which is the subject of a sale by other hand, if the new residence costs him after December 31, 1953 (section the taxpayer less than the adjusted 1034(a); for detailed explanation see sales price of the old residence, gain is paragraph (c)(3) of this section). recognized to the extent of the dif- (2) New residence means property used ference. Thus, if an amount equal to or by the taxpayer as his principal resi- greater than the adjusted sales price of dence which is the subject of a pur- an old residence is invested in a new chase by him (section 1034(a); for de- residence, according to the rules stated tailed explanation and limitations see in section 1034, none of the gain (if any) paragraphs (c)(3) and (d)(1) of this sec- realized from the sale shall be recog- tion). nized. If an amount less than such ad- (3) Adjusted sales price means the justed sales price is so invested, gain amount realized reduced by the fixing- shall be recognized, but only to the ex- up expenses (section 1034(b)(1); for spe- tent provided in section 1034. If there is cial rule applicable in some cases to 133 VerDate Mar<15>2010 09:50 May 09, 2011 Jkt 223094 PO 00000 Frm 00143 Fmt 8010 Sfmt 8010 Y:\SGML\223094.XXX 223094 WReier-Aviles on DSKGBLS3C1PROD with CFR § 1.1034–1 26 CFR Ch. I (4–1–11 Edition) husband and wife, see paragraph (f) of (7) Cost of purchasing the new residence this section). means the total of all amounts which (4) Amount realized is to be computed are attributable to the acquisition, by subtracting, construction, reconstruction, and im- (i) The amount of the items which, in provements constituting capital ex- determining the gain from the sale of penditures, made during the period be- the old residence, are properly an offset ginning 18 months (one year in the case against the consideration received of a sale of an old residence prior to upon the sale (such as commissions and January 1, 1975) before the date of sale expenses of advertising the property of the old residence and ending either for sale, of preparing the deed, and of (i) 18 months (one year in the case of a other legal services in connection with sale of an old residence prior to Janu- the sale); from ary 1, 1975) after such date in the case (ii) The amount of the consideration of a new residence purchased but not so received, determined (in accordance constructed by the taxpayer, or (ii) two with section 1001(b) and regulations years (18 months in the case of a sale of issued thereunder) by adding to the an old residence prior to January 1, sum of any money so received, the fair 1975) after such date in the case of a market value of the property (other new residence the construction of than money) so received. If, as part of which was commenced by the taxpayer the consideration for the sale, the pur- before the expiration of 18 months (one chaser either assumes a liability of the year in the case of a sale of an old resi- taxpayer or acquires the old residence dence prior to January 1, 1975) after subject to a liability (whether or not such date (section 1034(a), (c)(2) and the taxpayer is personally liable on the (c)(5); for detailed explanation, see debt), such assumption or acquisition, paragraph (c)(4) of this section; for spe- in the amount of the liability, shall be cial rule applicable in some cases to treated as money received by the tax- husband and wife, see paragraph (f) of payer in computing the amount realized. this section; see also paragraph (b)(9) of (5) Gain realized is the excess (if any) this section for definition of purchase). of the amount realized over the ad- (8) Sale (of a residence) means a sale justed basis of the old residence (see also section 1001(a) and regulations or an exchange (of a residence) for issued thereunder). other property which occurs after De- (6) Fixing-up expenses means the ag- cember 31, 1953, an involuntary conver- gregate of the expenses for work per- sion (of a residence) which occurs after formed (in any taxable year, whether December 31, 1950, and before January beginning before, on, or after January 1, 1954, or certain involuntary conver- 1, 1954) on the old residence in order to sions where the disposition of the prop- assist in its sale, provided that such ex- erty occurs after December 31, 1957, in penses (i) are incurred for work per- respect of which a proper election is formed during the 90-day period ending made under section 1034(i)(2) (see sec- on the day on which the contract to tions 1034(c)(1), 1034(i)(1)(A), and sell the old residence is entered into; 1034(i)(2); for detailed explanation con- and (ii) are paid on or before the 30th cerning involuntary conversions, see day after the date of the sale of the old paragraph (h) of this section). residence; and (iii) are neither (a) al- (9) Purchase (of a residence) means a lowable as deductions in computing purchase or an acquisition (of a resi- taxable income under section 63(a), nor dence) on the exchange of property or (b) taken into account in computing the partial or total construction or re- the amount realized from the sale of construction (of a residence) by the the old residence (section 1034(b) (2) taxpayer (section 1034(c) (1) and (2)). and (3)). Fixing-up expenses does not in- However, the mere improvement of a clude expenditures which are properly residence, not amounting to recon- chargeable to capital account and struction, does not constitute purchase which would, therefore, constitute ad- of a residence.
Load more

Recommended publications
  • Mississippi HB 1704, Income Tax; Revise Certain Provisions to Address Investment in Federally Designated Qualified Opportunity Z
    MISSISSIPPI LEGISLATURE REGULAR SESSION 2019 By: Representative Hines To: Ways and Means HOUSE BILL NO. 1704 1 AN ACT TO AMEND SECTION 27-7-9, MISSISSIPPI CODE OF 1972, TO 2 PROVIDE THAT TO THE EXTENT THAT GAIN IS NOT RECOGNIZED OR IS 3 DEFERRED FOR THE SALE OR EXCHANGE OF PROPERTY OR FOR INVESTMENT IN 4 QUALIFIED OPPORTUNITY ZONE PROPERTY THROUGH A QUALIFIED 5 OPPORTUNITY FUND UNDER FEDERAL LAW, THERE SHALL BE NO GAIN 6 RECOGNIZED OR GAIN SHALL BE DEFERRED FOR SUCH SALE OR EXCHANGE OF 7 PROPERTY OR INVESTMENT FOR THE PURPOSES OF THE STATE INCOME TAX 8 LAW, PROVIDED THAT THE PROPERTY IS IN OR THE INVESTMENT IS IN 9 QUALIFIED OPPORTUNITY ZONE PROPERTY IN A QUALIFIED OPPORTUNITY 10 ZONE LOCATED IN THIS STATE; TO PROVIDE THAT TO THE EXTENT THAT 11 THERE IS AN INCREASE IN BASIS FOR SUCH PROPERTY OR INVESTMENT 12 UNDER FEDERAL LAW, THERE SHALL BE AN INCREASE IN BASIS FOR THE 13 PROPERTY OR INVESTMENT FOR THE PURPOSES OF THE STATE INCOME TAX 14 LAW; AND FOR RELATED PURPOSES. 15 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI: 16 SECTION 1. Section 27-7-9, Mississippi Code of 1972, is 17 amended as follows: 18 27-7-9. (a) Except as provided in Sections 27-7-95 through 19 27-7-103, determination of amount of gain or loss. 20 (1) Computation of gain or loss. The gain from the 21 sale or other disposition of property shall be the excess of the 22 amount realized therefrom over the adjusted basis provided in 23 subsection (c) for determining gain, and the loss shall be the H.
    [Show full text]
  • Publication 523 Reminders
    Userid: CPM Schema: tipx Leadpct: 100% Pt. size: 10 Draft Ok to Print AH XSL/XML Fileid: … tions/P523/2020/A/XML/Cycle04/source (Init. & Date) _______ Page 1 of 22 12:06 - 1-Mar-2021 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Department of the Treasury Contents Internal Revenue Service Future Developments ....................... 1 Publication 523 Reminders ............................... 1 Cat. No. 15044W Introduction .............................. 2 Does Your Home Sale Qualify for the Exclusion of Gain? .............................. 2 Selling Eligibility Test ........................... 3 Does Your Home Qualify for a Partial Your Home Exclusion of Gain? ...................... 6 Figuring Gain or Loss ....................... 7 For use in preparing Basis Adjustments—Details and Exceptions ..... 8 Business or Rental Use of Home ............ 11 Returns 2020 How Much Is Taxable? ..................... 14 Recapturing Depreciation ................. 15 Reporting Your Home Sale .................. 15 Reporting Gain or Loss on Your Home Sale .... 16 Reporting Deductions Related to Your Home Sale ............................... 17 Reporting Other Income Related to Your Home Sale .......................... 17 Paying Back Credits and Subsidies .......... 18 How To Get Tax Help ...................... 18 Index .................................. 22 Future Developments For the latest information about developments related to Pub. 523, such as legislation enacted after it was published, go to IRS.gov/Pub523. Reminders Photographs of missing children. The IRS is a proud partner with the National Center for Missing & Exploited Children® (NCMEC). Photographs of missing children se- lected by the Center may appear in this publication on pa- ges that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 800-THE-LOST (800-843-5678) if you recognize a child.
    [Show full text]
  • 2020 Instructions for Form 8824 Page 3 of 4 Fileid: … Ions/I8824/2020/A/XML/Cycle04/Source 12:21 - 15-Dec-2020
    Userid: CPM Schema: instrx Leadpct: 100% Pt. size: 8.5 Draft Ok to Print AH XSL/XML Fileid: … ions/I8824/2020/A/XML/Cycle04/source (Init. & Date) _______ Page 1 of 4 12:21 - 15-Dec-2020 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Department of the Treasury 2020 Internal Revenue Service Instructions for Form 8824 Like-Kind Exchanges (and section 1043 conflict-of-interest sales) Section references are to the Internal Revenue Code is involved in the exchange. Also, the basis money, gain is recognized to the extent of unless otherwise noted. of the like-kind property received is figured the other property and money received, but a on Form 8824. loss isn't recognized. General Instructions Certain members of the executive branch Section 1031 doesn’t apply to exchanges of the federal government and judicial Future developments. For the latest of real property held primarily for sale. See officers of the federal government use Part section 1031(a)(2). In addition, section 1031 information about developments related to IV to elect to defer gain on conflict-of-interest Form 8824 and its instructions, such as doesn't apply to certain exchanges involving sales. Judicial officers of the federal tax-exempt use property subject to a lease. legislation enacted after they were government are the following. published, go to IRS.gov/Form8824. See section 470(e)(4). 1. Chief Justice of the United States. Definition of real property. Property is real Reminders 2. Associate Justices of the Supreme property for purposes of section 1031 if: Court.
    [Show full text]
  • A Comparative Approach to Income Tax Law in the United Kingdom and the United States
    Catholic University Law Review Volume 46 Issue 1 Fall 1996 Article 3 1996 A Comparative Approach to Income Tax Law In the United Kingdom and the United States William B. Barker Follow this and additional works at: https://scholarship.law.edu/lawreview Recommended Citation William B. Barker, A Comparative Approach to Income Tax Law In the United Kingdom and the United States, 46 Cath. U. L. Rev. 7 (1997). Available at: https://scholarship.law.edu/lawreview/vol46/iss1/3 This Article is brought to you for free and open access by CUA Law Scholarship Repository. It has been accepted for inclusion in Catholic University Law Review by an authorized editor of CUA Law Scholarship Repository. For more information, please contact [email protected]. ARTICLES A COMPARATIVE APPROACH TO INCOME TAX LAW IN THE UNITED KINGDOM AND THE UNITED STATES William B. Barker* INTRODUCTION Throughout the world, income taxation is one of the principal methods by which nation-states raise revenue to fund ever-increasing governmen- tal expenditure. While several different taxing regimes exist, it comes as no surprise to tax professionals that these different tax systems share many common principles and, indeed, a common language of income tax- ation. For example, there are many similarities in the various approaches taken to determine exactly what is to be included in the income tax base, and most systems generally compute taxable income by allowing for re- ductions or deductions for the cost of making profits, including al- lowances for capital recovery. Once one begins to focus on specifics, however, these broad similarities may be obscured by the many differences in various income tax laws.
    [Show full text]
  • Page 2033 TITLE 26—INTERNAL REVENUE CODE § 1001
    Page 2033 TITLE 26—INTERNAL REVENUE CODE § 1001 [§ 1000. Reserved] which are treated under section 164(d) as im- posed on the taxpayer if such taxes are to be Subchapter O—Gain or Loss on Disposition of paid by the purchaser. Property (c) Recognition of gain or loss Part Except as otherwise provided in this subtitle, I. Determination of amount of and recognition of gain or loss. the entire amount of the gain or loss, deter- II. Basis rules of general application. mined under this section, on the sale or ex- III. Common nontaxable exchanges. change of property shall be recognized. IV. Special rules. (d) Installment sales [V. Repealed.] [VI. Repealed.] 1 Nothing in this section shall be construed to VII. Wash sales; straddles. prevent (in the case of property sold under con- AMENDMENTS tract providing for payment in installments) the taxation of that portion of any installment pay- 1995—Pub. L. 104–7, § 2(c), Apr. 11, 1995, 109 Stat. 93, ment representing gain or profit in the year in struck out item for part V ‘‘Changes to effectuate which such payment is received. F.C.C. policy’’. 1990—Pub. L. 101–508, title XI, § 11801(b)(9), Nov. 5, (e) Certain term interests 1990, 104 Stat. 1388–522, struck out item for part VIII (1) In general ‘‘Distributions pursuant to Bank Holding Company Act’’. In determining gain or loss from the sale or 1981—Pub. L. 97–34, title V, § 501(d)(3), Aug. 13, 1981, 95 other disposition of a term interest in prop- Stat. 327, substituted ‘‘Wash sales; straddles’’ for erty, that portion of the adjusted basis of such ‘‘Wash sales of stock or securities’’ in item for part VII.
    [Show full text]
  • The Taxation of Punitive Damages: Recent Interpretation of the Section 104(A)(2) Exclusion
    Pace Law Review Volume 16 Issue 1 Fall 1995 Article 8 Domestic Violence and the Law Symposium September 1995 The Taxation of Punitive Damages: Recent Interpretation of the Section 104(a)(2) Exclusion Wendy S. Kennedy Follow this and additional works at: https://digitalcommons.pace.edu/plr Recommended Citation Wendy S. Kennedy, The Taxation of Punitive Damages: Recent Interpretation of the Section 104(a)(2) Exclusion, 16 Pace L. Rev. 111 (1995) Available at: https://digitalcommons.pace.edu/plr/vol16/iss1/8 This Article is brought to you for free and open access by the School of Law at DigitalCommons@Pace. It has been accepted for inclusion in Pace Law Review by an authorized administrator of DigitalCommons@Pace. For more information, please contact [email protected]. Comment The Taxation of Punitive Damages: Recent Interpretation of the Section 104(a)(2) Exclusion I. Introduction ........................................ 111 II. The Controversy .................................... 113 III. History of the § 104(a)(2) Exclusion ................. 117 A. The Statutory History of I.R.C. § 104(a)(2) ...... 118 B. Relevant Internal Revenue Service Rulings ..... 119 C. Cases Interpreting the Personal Injury Damages Exclusion ....................................... 122 1. Commissioner v. Glenshaw Glass ............ 123 2. Roemer v. Commissioner..................... 125 3. Commissioner v. Miller ...................... 126 IV. Recent Judicial Interpretation of the § 104(a)(2) Exclusion ........................................... 128 A. United States v. Burke .......................... 129 B. The Recent Circuit Split in Cases Involving Purely Punitive Damages ....................... 132 1. Horton v. Commissioner ..................... 132 2. Hawkins v. United States .................... 135 3. Reese v. United States ....................... 138 4. Wesson v. United States ..................... 140 V. The Omnibus Budget Reconciliation Act of 1989 ...
    [Show full text]
  • 200037010 Person to Contact
    Internal Revenue Service Department of the Treasury Index Numbers: 2511-00.00,2601-00.00 Washington, DC 20224 1001-00.00, 1015-00.00 Number: 200037010 Person to Contact: Release Date: 9/15/2000 Telephone Number: Refer Reply To: CC:DOM:P&SI:4-PLR-103988-00 Date: June 5, 2000 Re: Legend A = B = Child A = Child B = Child C = Child C1 = Child C2 = Child C3 = Trust I = Trust J = Date 3 = Dear : This is in response to your letter dated February 1, 2000, and prior correspondence submitted on behalf of the trustees and trust beneficiaries requesting income tax and generation-skipping transfer tax rulings concerning the merger of identical trusts. A and B, both deceased, had three children: Child A, Child B, and Child C. On Date 3, Trust I and Trust J were created. Under the terms of Trust I, as the result of certain contingencies, separate trusts were created for the benefit of Child C2 (Trust I- C2) and Child C3 (Trust I-C3). In addition, separate trusts were created from Trust J for the benefit of Child C2 (Trust J-C2) and Child C3 (Trust J-C3). The terms of Trust I-C3 and Trust J-C3 are identical and the trustees propose to merge Trust I-C3 into Trust J- C3. The trustees intend to petition the appropriate state court to (1) determine that each trust proposed to be merged is identical, and (ii) order the consolidation of the 2 PLR-103988-00 trusts upon receipt of a favorable private letter ruling. It is represented that there have been no additions to the subject trusts, constructive or otherwise, after September 25, 1985.
    [Show full text]
  • Taxing the Sale of Property
    Puhe Lift journal VOLUME 1980 JUNE NUMBER 3 TAXING THE SALE OF PROPERTY DENNIS S. KARJALA* I. INTRODUCTION ........................................... 419 II. AN ILLUSTRATIVE EXAMPLE-THREE TAXPAYERS A, B, AND C ................................................... 421 A. Taxation of A (isolated-salepurchaserobligation)-Ac- counting Method Governing .......................... 423 1. A on Accrual Method ............................ 423 2. A on Cash Method .............................. 423 (a) Contract is a cash equivalent ................ 423 (b) Contractis not a cash equivalent ............ 423 B. Taxation of A-Section 1001 Governing ............. 424 1. Contract Treated as Other Than Property ........ 424 (a) Amount realizedcalculated independently of ac- counting method ............................ 424 (b) Amount realized determined by accounting m ethod ..................................... 424 2. Contract Treated as Property.................... 424 (a) Fairmarket value not ascertainable......... 425 (b) Fair market value ascertainable ............ 425 C. Taxation of B (isolated-salethird-party obligation)... 426 * Associate Professor of Law, Arizona State University. B.S.E. 1961, Princeton University; M.S. 1963, Ph.D. 1965, University of Illinois; J.D. 1972, University of California (Berkeley). THE FOLLOWING CITATIONS WILL BE USED IN THIS ARTICLE: Treas. Release No. B-1758 (July 27, 1979) (statement of Harry L. Gutman, Deputy Tax Leg- islative Counsel, Department of the Treasury, before the Subcommittee on Select Revenue Meas- ures of the House Committee on Ways and Means) [hereinafter cited as Treas. Release No. B- 1758]; J. SEIDMAN, LEGISLATIVE HISTORY OF FEDERAL INCOME TAX LAWS 1938-1861 (1938) [here- inafter cited as J. SEIDMAN]; Ginsburg, Taxing the Salefor Future Payment, 30 TAX L. REV. 471 (1975) [hereinafter cited as Ginsburg]; References to the Internal Revenue Code of 1954, as amended (the Code), will be made by section number only.
    [Show full text]
  • 2020 Instructions for Form 4797
    Userid: CPM Schema: Leadpct: 100% Pt. size: 9.5 Draft Ok to Print instrx AH XSL/XML Fileid: … ions/I4797/2020/A/XML/Cycle06/source (Init. & Date) _______ Page 1 of 12 9:14 - 6-Nov-2020 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Department of the Treasury 2020 Internal Revenue Service Instructions for Form 4797 Sales of Business Property (Also Involuntary Conversions and Recapture Amounts Under Sections 179 and 280F(b)(2)) Section references are to the Internal Revenue securities or commodities and made a • Use Form 6252, Installment Sale Code unless otherwise noted. mark-to-market election under section Income, to report the sale of property 475(f). under the installment method. Future Developments • Election to defer a qualified section • Use Form 8824, Like-Kind 1231 gain (gains derived from the sale Exchanges, to report exchanges of For the latest information about of property used in a trade or business) qualifying business or investment real developments related to Form 4797 and invested in a qualified opportunity fund property for real property of a like kind. its instructions, such as legislation (QOF). For exchanges of real property used in a enacted after they were published, go to trade or business (and other noncapital IRS.gov/Form4797. Other Forms You May assets), enter the gain or (loss) from Have To File Form 8824, if any, on Form 4797, line 5 or line 16. General Instructions Use Form 4684, Casualties and • • If you sold property on which you Thefts, to report involuntary conversions claimed investment credit, see Form Purpose of Form from casualties and thefts.
    [Show full text]
  • BASIS and AMOUNT REALIZED UNDER CRANE: a CURRENT VIEW of SOME TAX EFFECTS in MORTGAGE FINANCING Louis A
    1969] BASIS AND AMOUNT REALIZED UNDER CRANE: A CURRENT VIEW OF SOME TAX EFFECTS IN MORTGAGE FINANCING Louis A. DEL COTTO t I. INTRODUCTION All tax students should be familiar with the general principle that indebtedness to which property is subject is included for income tax purposes in its "cost," 1 even though the purchaser does not incur or assume personal liability for the debt. That the United States Supreme Court approves this principle is evident from the reasoning in Crane v. Commissioner,2 and decisions affirming it can be found in both the 3 federal courts of appeals and the Tax Court of the United States. Crane and the lower court decisions following it also hold that upon sale of the property, the indebtedness must be included in amount real- ized for purposes of computing the seller's gain or loss, whether or not he is personally liable on the debt, and whether the debt is part of the basis of the property 4 or is excluded therefrom because it was incurred on a borrowing subsequent to the acquisition of the property." One new to the area must wonder how there can be "cost" without investment of some form of economic wealth, or at least commitment of one's personal credit, and must question how one can "realize" 6 a debt for ivhich he has no personal obligation 1 If a cost basis can be acquired without economic investment, it becomes possible to obtain a tax-free cash flow from depreciation deductions based on "cost" without ever having to account for all or any of the tax benefits pro- t Professor of Law, State University of New York at Buffalo.
    [Show full text]
  • Contingent Consideration and Contingent Liabilities In
    CONTINGENT CONSIDERATION AND CONTINGENT LIABILITIES IN ACQUISITIONS —————————— OUTLINE —————————— FEBRUARY 2012 —————————— AMERICAN LAW INSTITUTE-AMERICAN BAR ASSOCIATION FOURTH ANNUAL ADVANCED COURSE OF STUDY CORPORATE TAXATION —————————— MARCH 29-30, 2012 WASHINGTON, D.C. —————————— ROBERT H. WELLEN IVINS, PHILLIPS & BARKER WASHINGTON, D.C. —————————— TABLE OF CONTENTS Page* NOMENCLATURE .....................................................................................................................1 INTRODUCTION ........................................................................................................................2 TAXABLE ASSET AND STOCK ACQUISITIONS ..................................................................4 I. Contingent Purchase Price in Acquisitions of Target Assets and Acquisitions of Target Stock Without Section 338(h)(10) Elections ............................................................4 A. Treatment of Seller – Choice Between Installment Method and Election Out ..............4 B. Treatment of Seller – Installment Method .....................................................................4 1. Installment Method -- Application...........................................................................4 2. Installment Method – Election Out .........................................................................4 3. Installment Method – Method of Calculating Gain Recognized .............................5 4. Allocating Installment Obligation to Certain Assets ...............................................7
    [Show full text]
  • Recent Tax Law Changes Make Income Tax Planning More Important Than Ever
    RECENT TAX LAW CHANGES MAKE INCOME TAX PLANNING MORE IMPORTANT THAN EVER Jonathan Samel, Esq. One universal and challenging objective in wealth preservation planning is reducing taxes. Recent tax law changes have in many cases shifted the focus of such planning from estate and gift tax reduction to income tax reduction. On January 1, 2013, Congress passed the American Taxpayer Relief Act of 2012 (ATRA) which, among other things, increased certain income tax rates. ATRA established a new top rate for ordinary income of 39.6% (up from 35%) for taxpayers with taxable income in excess of $400,000 for single individuals, $450,000 for married couples filing jointly, and only $12,150 for estates and trusts in 2014. In addition, the top long term capital gain and qualified dividend tax rate was increased from 15% to 20% for taxpayers in the above mentioned highest ordinary income tax bracket. The Patient Protection and Affordable Care Act (“PPACA”), which was originally enacted in 2010, established a new 3.8% surtax on investment income which first became effective in 2013. For purposes of this tax, investment income includes interest, dividends, rent, royalties, capital gain and passive activity income. This additional tax applies to taxpayers with an adjusted gross income in excess of $200,000 for single individuals, and $250,000 for married couples filing jointly. For estates and trusts, this tax applies to the lesser of (i) undistributed net investment income or (ii) the excess of adjusted gross income over the amount at which the top income tax bracket for trusts and estates begins (only $12,150 in 2014).
    [Show full text]