Individual tax, property transactions, business law and tax ethics. Endless CPA-style questions with the work shown.
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REG reference sheet
Property basis
Purchased: cost. Inherited: fair market value at death (or the alternate valuation date), always long-term.
Gift: donor's basis carries over. If value at the gift is below the donor's basis, use the donor's basis for gains and the gift-date value for losses; a sale in between gives no gain or loss.
Like-kind exchange: gain recognized = lesser of realized gain or boot received. New basis = old basis + gain recognized − boot received.
Sales of business property
Section 1245 (equipment): gain up to depreciation taken is ordinary income; the rest is Section 1231 gain.
Section 121 home sale: exclude up to $250,000 ($500,000 married filing jointly) if owned and used as a main home 2 of the last 5 years.
Tax procedure
Assessment period: 3 years from the later of filing or the due date; 6 years if over 25% of gross income is omitted; unlimited for fraud or no return.
Preparer penalty standards: substantial authority (undisclosed), reasonable basis (disclosed), more likely than not (tax shelters).
Contracts
Common law: mirror image rule. UCC (goods): more flexible, with firm offers by merchants.
Statute of frauds: land, more than one year, goods of $500+, paying another's debt, marriage.
Dollar thresholds that change each year are given in the question when needed.