Federal Taxation II: Property Transactions of Business Owners and Shareholders

Go to Course: https://www.coursera.org/learn/federal-taxation-business

Introduction

### Course Review: Federal Taxation II: Property Transactions of Business Owners and Shareholders In the intricate world of U.S. federal taxation, navigating property transactions can often be daunting, especially for business owners and shareholders. The Coursera course **"Federal Taxation II: Property Transactions of Business Owners and Shareholders"**, part of the broader Federal Taxation specialization offered by the University of Illinois at Urbana-Champaign, provides a comprehensive and practical guide through these complexities. This course is ideal for accounting and finance professionals, as well as business owners who seek a deeper understanding of tax rules affecting property transactions. #### Course Overview The course focuses on essential topics such as cost recovery methods, the nuances of gains and losses, and the intricacies of non-taxable exchanges. With a well-structured syllabus, students will leave equipped with the knowledge necessary to navigate the taxation landscape confidently. The course includes a series of modules designed to build your understanding, progressively guiding you through differing facets of property transactions. #### Detailed Syllabus Breakdown 1. **Introduction to the Course**: The course kicks off with an orientation that lays the groundwork for technical skills essential for navigating the course platform. This initial module sets the stage for effective learning by fostering interaction among classmates and instructors. 2. **Module 1: Introduction to Cost Recovery and Depreciation**: This segment provides a foundation by explaining the Modified Accelerated Cost Recovery System (MACRS) for both real and personal assets. It's an excellent starting point for understanding how property depreciation is calculated. 3. **Module 2: Accelerated Depreciation, Amortization, and Depletion**: Here, learners explore additional first-year depreciation concepts, including Section 179 and bonus depreciation. The module also covers amortization for intangible assets and depletion for natural resources, ensuring a holistic grasp of how different asset types are managed under federal tax law. 4. **Module 3: Gains, Losses, and Adjusted Basis**: Understanding the difference between realized and recognized gains is critical. This module dives deep into property transactions and establishes the basis for assets, equipping students with knowledge pertinent to making informed tax decisions. 5. **Module 4: Disallowed Losses, Like-Kind Exchanges, and Involuntary Conversions**: This invaluable module breaks down advanced concepts such as like-kind exchanges, where exchanges can occur without immediate tax recognition. This knowledge is crucial for making strategic business decisions regarding asset exchanges. 6. **Module 5: Special Gain/Loss Provisions**: You’ll learn about exceptional cases, like the non-taxation of your primary residence sale and other important areas such as wash sales and the treatment of worthless securities. 7. **Module 6: Character and the Netting Process**: Understanding how different gains and losses are categorized and their implications on taxation is vital. This module clarifies the distinctions between ordinary, capital, and Section 1231 assets, enhancing the learner’s knowledge base significantly. 8. **Module 7: Depreciation Recapture and Other Items in the Netting Process**: Delving into specialized depreciation aspects and how they fit into the tax system provides an analytical lens through which students can view their practices and strategies. 9. **Module 8: Final Comprehensive Exam**: Finally, the practical application takes center stage, where students will critically engage with hypothetical tax situations to apply theoretical knowledge to real-world scenarios, ensuring a comprehensive understanding by the course's end. #### Recommendation I wholeheartedly recommend **"Federal Taxation II: Property Transactions of Business Owners and Shareholders"** for anyone looking to deepen their understanding of U.S. tax regulations regarding property transactions. The course is meticulously structured, combining theoretical knowledge with real-world application, making it exceptionally beneficial for tax professionals, accountants, and informed business owners. The assignments encourage practical engagement, and the final exam ensures that students are not only absorbing information but are also able to apply it effectively. With the course’s depth, interactive nature, and expert instruction from University of Illinois faculty, it serves as an invaluable resource for mastering federal taxation principles. Whether you're looking to upskill, navigate your business's property transactions more efficiently, or prepare for a career in taxation, this course offers the insights and tools you'll need to succeed in an ever-evolving tax landscape.

Syllabus

INTRODUCTION TO THE COURSE

In this module, you will become familiar with the course, your instructor and your classmates, and our learning environment. This orientation will also help you obtain the technical skills required to navigate and be successful in this course.

In this module, you will be introduced to concepts of cost recovery used by U.S. Taxpayers. The nature of property will be discussed designating the difference between realty and personalty. The Modified Accelerated Cost Recovery System (MACRS) will be explained along with its classification of both real and personal assets as well as applicable conventions used in depreciating property. Finally, learners will discover how to use the tax depreciation tables to aid in the determination of allowable cost recovery deductions.

In this module, you will take a deeper dive into concepts of cost recovery used in the U.S. Federal tax structure. This deeper dive begins with a discussion about the two different types of additional first year depreciation, known as Section 179 depreciation and "bonus" depreciation. Next, you will learn about listed property, which faces limitations on the deductibility. You will learn how intangible personal and real property costs are recovered through amortization, and which kinds of intangible property are eligible to be amortized. You will also learn how natural resource costs are recovered through depletion deductions.

In this module, you will take a deep dive into property transactions, specifically disposals, and their tax consequences under U.S. federal tax law. First, we’ll begin by discussing the economic concept of amount realized. Next, we’ll discuss differences between the amount and gains or losses realized versus recognized, such as deferred or postponed gains and disallowed losses. Last, we’ll discuss the three main ways property basis is established, namely cost basis, gift basis, and inheritance basis.

In this module, you will learn about unique property transactions where gains and/or losses are deferred. First, we’ll discuss circumstances where certain losses on the disposal of property are not allowed to be recognized. Next, we’ll discuss a type of non-taxable exchange called “like-kind exchange,” which allows properties to be exchanged with no tax recognition, and the rules governing its tax deferred status. Next, we’ll discuss specific circumstances where part of the non-taxable transaction actually becomes taxable due to receipt of non-like-kind property, called boot. Last, we’ll talk about what basis the newly exchanged property should have, and what the holding period should be. We'll then continue our discussion regarding non-taxable exchanges and discuss involuntary conversions. You will learn the earliest and latest dates to involuntarily exchange an asset after a casualty loss or condemnation. Next, we discuss paths for conversion, direct and indirect, and their tax consequences. We discuss two tests governing the involuntary conversion rules, specifically the functional use test and the taxpayer use test.

In this module, we start off by discussing the rules governing the non-taxation of the sale of a taxpayer’s primary residence. We'll discover special nonrecognition rules for the contribution of property to business entities. Next, we’ll learn what wash sales are and the dates that determine whether or not the losses can be recognized. Finally, we'll learn about the special treatment of worthless securities and gains and losses on certain small business stock.

In this module, we discuss the character and applicable tax rates for gains and losses on the disposal of property. Gains and losses are categorized into ordinary, Section 1231, and long-term capital “preferential” rates. Next, the importance of the holding period and its determination of whether an asset is designated as short-term versus long-term is discussed. The netting of gains and losses from different characterizations is discussed. Last, we discuss what a Section 1231 asset is and how it gets treated in the netting process.

In this module, you will take a deeper dive into two categories within Section 1231 assets, Section 1245 assets and Section 1250 assets. You will learn about both depreciation recapture and depreciation unrecapture, and the varying special tax rates for gains that are recaptured or unrecaptured. You will discover how other gains and losses fit into the netting process. You will learn about a special rule that applies to the sale of depreciable property between related parties. Last, you will learn about the Net Investment Income Tax.

In this final module, you will apply the tax rules you have learned throughout this course to a series of problems. When presented with hypothetical taxpayer situations, you will identify potential tax issues and determine appropriate tax treatments.