Unfavorable tax treatment of gain on sales not completed at decedent's death can be avoided

Article Abstract:

The Internal Revenue Code holds that a decedent's property basis is the full market value of the property at the time of the decedent's death, but this does not apply to income in respect of a decedent (IRD) that is taxable to the recipient and is included in the decedent's estate without a basis step-up. The gain from sales substantially completed before a decedent's death will be recognized as gain in respect to the decedent, increasing the recognized gain in the estate, based on the IRS' economic activities and right to income tests. Executors of estates faced with large tax liabilities from sales not completed at decedent's time of death should consider cancelling the sale and negotiating a sale to another party, thus demonstrating that activities of decedent did not lead to a right to income, defeating both the economic activities and right to income tests.

Methods, Interpretation and construction, Tax law, Tax accounting, Executors and administrators, Executors

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Loss on sale of residence has tax saving implications

Article Abstract:

Section 1034 allows gains on the sale of a principal residence to be deferred but offers no similartax benefits for losses. Generally, losses on personal property are not tax-deductible. Section 165(c) provides that such losses can be deducted only if they were incurred in a trade or business, in a transaction entered into forprofit, or from a casualty or theft. Nevertheless, careful planning can help taxpayers obtain tax savings even if their principal residence was sold at a loss. For instance, Section 1043's basis adjustment rules indirectly provide tax benefit from a loss by allowing taxpayers who have bought and sold a seriesof principal residences to use the loss on sale of a residence as a means to minimize the accumulated gain rolled over from earlier sales.

House selling, Home selling

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Premature disposition of property does not always mean recapture of investment credit

Article Abstract:

The investment tax credit has been lumped together with employee stock ownership credit, alcohol fuels credit, and jobs tax credit under the Deficit Reduction Act of 1984. This may prevent the recapture of credit on early disposition when the taxpayer also claims other credits because of recomputation of the credits. Recapture rules under the law cover recovery and non-recovery property.

Laws, regulations and rules, Employment tax credit, Tax credits, Investment tax credit

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