Video: Introduction to Taxable and Nontaxable Dispositions

In this lesson, Nick Palazzolo, CPA, unravels the complexities of taxable and nontaxable dispositions, laying a solid foundation for understanding how various transactions impact tax liability. He breaks down the terms "realized," "recognized," and "basis" - a crucial formula that plays a pivotal role in navigating tax-related questions. As Nick explains the intricacies of computing gain or loss from sales, exchanges, stocks, and bonds, he also clarifies how these are reported and taxed differently based on asset nature and holding periods. Moreover, Nick dives into non-taxable dispositions, emphasizing their unique trait of deferring tax implications to a future date, and how this affects the basis of assets. With his guidance, the labyrinth of managing assets, complying with tax laws, and strategic decision-making in tax matters becomes easier to navigate.

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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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Let's dive into an introduction here. Taxable and non-taxable dispositions, incredibly important because when you sell something or you dispose of it, you get rid of it, you just, whatever it is, you gift it away, you get rid of it. Disposition, a good general term for just getting rid of something, no matter what the means. Some of those dispositions will be taxable, some will be non-taxable, and a lot of IRS rules and regulations will follow. Now, these are important concepts to understanding how different transactions affect a taxpayer's liability. We've got taxable dispositions. These are gonna generally refer to transactions that result in a gain or loss for tax purposes. Examples here, just a normal sale or exchange of property, whether it's real estate, personal property, stocks, or bonds. We got the gain or loss from taxable disposition is typically calculated as the difference between the amount realized and the adjusted basis. So we'll see very commonly, and I'll talk about this, realized recognized basis. Realized recognized basis, that's incredibly important. You'll get tired of me saying it. That's an incredibly important formula to have down. It'll get you through a lot of questions. Those are gonna be specifically more so for like-kind transactions, which do come up in other lessons as well. Super important to know there. Taxable dispositions must be reported on the taxpayer's income tax return, and any gain must be subject to federal income tax. Depending on the nature of the asset and the holding period, gains from taxable dispositions may be classified as short-term or long-term capital gains, which can have different tax rates. And losses from taxable dispositions may be used to offset gains, and in some cases, ordinary income, subject to certain limitations. Nice general introduction. Obviously we'll get much

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Property Tax: Acquisition and Disposition of Assets

Module: 5 Concepts, 55 Videos

Basis and Holding Period of Assets Overview

0:44

Introduction to Basis and Holding Period of Assets

8:20

Costs Included in a Asset's Taxable Basis

7:24

Examples of Calculating Tax Basis