Question

True or False: a. In terms of depreciation tax policy, a “see-through building” is one that is mostly made of glass. b. Donnie sells a recording studio to his sister, Marie, for $300,000, which is its appraised value. Donnie purchased the property five years ago for $600,000, and has taken $200,000 in depreciation deductions on the property. The sale is at arms-length and is for cash. Donnie is unable to claim his $100,000 loss from the sale currently but can carry the loss forward and apply it against capital gains he incurs in future years. c. Real property is always depreciated using the straight-line method. d. Cost segregation studies are used to determine which IRC section 1250 components of a depreciable building are eligible for faster depreciation than is the structure itself. e. Disallowed passive losses and credits under IRC section 469 are carried forward and generally may be used to offset passive income in a subsequent tax year.

Answer 1

A. False - see-through building refers to building with a high vacancy rate so during night when the lights are on, one can clearly see through the building to the other side.

B. True

Any loss on sale of a long-term capital asset like house and gold which are held for three years can be adjusted only against a long-term capital gain.

C. True

Real property except land is always depreciated using the straight-line method. Land is non-depreciable asset.

D. False

Cost segregation allows a purchaser to achieve faster depreciation deductions as well as possible and easier subsequent write-offs, so as to increase cash flow.

E. True

Disallowed losses are carried forward . There is no limit on carryforward.