Homework help needed - Accounting Discussion

Oct 18th, 2015
Price: $15 USD

Question description

1. MACRS vs. Financial Depreciation Methods

How would you compare the MACRS method for personal property to non-tax financial depreciation? Describe the MACRS system for personal property in terms of both (1) Recovery Period and (2) Depreciation method used. Why is MACRS less "realistic"? Also, why does the tax law allow taxpayers to use this special method?

2. Basis of Gifts

How do the rules work for determining the basis of gifts? Let me tell you a story: Years ago, I had a client who was very wealthy, with several million dollars of stock, all of which had a very low basis. She was going to give $10,000 of stock to each of her nephews and nieces. In each case the $10,000 of stock had a basis of only about $200. She asked me "Will they have taxable income on the gift?" I told her no, gifts are not taxable. The next April, she called me and yelled at me. She said they had each sold the stock and had huge taxable gains. I told her, "Of course, but that was not a gain on the "gift", that was a gain on the sale of the stock, which was another transaction." She told me "What did you think they were going to do with those stock shares, wallpaper their bathrooms with them?" Anyway, although my advice was technically correct, it was not very practical. I should have advised her about the results of a subsequent sale.

3. Step Up of Basis of Death

Under the IRC, a taxpayer who inherits property gets an automatic, income-tax-free, step-up in basis for that asset to its fair market value at death. Even very low basis, tremendously appreciated property is brought up to its fair market value as its basis, without any tax cost whatsoever. This tax giveaway almost seems too good to be true for estate planning purposes. (The old joke is, "People are just dying to get it.") So, why would Congress give taxpayers such a generous break? What was their motivation?

Tutor Answer

(Top Tutor) Daniel C.
School: UT Austin

Studypool has helped 1,244,100 students

Review from our student for this Answer

Oct 23rd, 2015
"all I can say is wow very fast work, great work thanks"
Ask your homework questions. Receive quality answers!

Type your question here (or upload an image)

1822 tutors are online

Brown University

1271 Tutors

California Institute of Technology

2131 Tutors

Carnegie Mellon University

982 Tutors

Columbia University

1256 Tutors

Dartmouth University

2113 Tutors

Emory University

2279 Tutors

Harvard University

599 Tutors

Massachusetts Institute of Technology

2319 Tutors

New York University

1645 Tutors

Notre Dam University

1911 Tutors

Oklahoma University

2122 Tutors

Pennsylvania State University

932 Tutors

Princeton University

1211 Tutors

Stanford University

983 Tutors

University of California

1282 Tutors

Oxford University

123 Tutors

Yale University

2325 Tutors