Video: Disposition of Assets

In this lesson, Nick Palazzolo delves into the intricacies of asset disposition, ensuring a solid grasp of key concepts like realized and recognized gains, taxable gain or 'boot,' and the implications of debt cancellation. He enthusiastically assures that these foundational principles are essential knowledge for more complex future topics, such as partnerships and S-Corps. Using clear examples, Nick clarifies the calculation of gains upon the sale or exchange of assets, the tax deferral opportunities in like-kind exchanges, and how cash proceeds are treated differently in various scenarios. Moreover, he discusses how debt forgiveness translates to taxable income, making it evident that mastering these concepts is not just important but manageable with determination and extra effort.

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Video Transcript

Instructor: Nick Palazzolo

Nick Palazzolo is head instructor of ExamPrep.ai CPA Review. Nick's teaching style is engaging & upbeat, combining practical Big 4 tax & assurance expertise with years of 1-on-1 coaching. His lessons are concise and emphasize what you need to know to pass. Whether you're a recent grad or working full-time, we’re confident you can conquer your CPA exams with Nick’s review.

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Disposition of assets. I know you're like, I wanted more of those questions. I totally get you. We got lots of great examples throughout the rest of the course. Talking about disposition of assets in general, it's essential to understand the difference between the realized and recognized gains, as well as the concept of taxable gain or boot and the impact of the cancellation of debt. You might be thinking a lot of this is going to go over what we just talked about. And yes, it does. And yes, that's on purpose. These are critically important concepts. I mean, this is foundational for everything we'll see later on with partnerships, S-Corps. So yeah, am I going to beat this to death and make sure you're an absolute expert at this? Yes, I am, because you are not going to slack off here when this is so crucial, especially for lessons we'll see in the future. Other exams, there are certain topics where it's just one-offs, but here this builds and builds and builds. A realized gain represents the actual increase in value of an asset when it's sold or disposed of in the real world. It's calculated by subtracting the assets adjusted basis, which is the original cost plus improvements minus any depreciation. That's obviously important as well, even in the cost recovery lesson, everywhere else like that from the selling price over the recognized gain. This is the portion of the realized gain that is actually subject to taxation and must be reported on a tax return. In some cases, the entire realized gain may be recognized if there's no tax rules affecting that. While in others, only a portion of it may be subject to taxation due to our tax deferral strategies like like-kind exchanges. This is

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Property tax transactions

Module: 3 Concepts, 34 Videos

Taxable and Nontaxable Dispositions Overview

1:43

Introduction to Taxable and Nontaxable Dispositions

3:21

Gain Recognized on Property Received as Compensation

2:31

Like-Kind Exchanges