Fed Tax Flowchart Forum

[fathergoose]

Those with Chirelstein, are you reading it front to back or jumping around? Curious which would help make the most sense/see big picture etc.

I read through it front to back. It makes sense if you do it for a general understanding because it walks you through the order that you have to deal with stuff for the later stuff to make sense.

If you already have a general grasp and are just boning up on certain parts of your outline then I could see jumping around being helpful too though.

[evilxs]

The seriously huge wall flowchart was not that helpful :/ Much more overwhelming than helpful.

I think the thing that helped me most for my exam was writing out answers to essays beforehand. I did a bunch of that, read the Emanuel cover to cover, and the Acing book and aced my exam.


When I took the actual exam, essays I had practiced showed up on the exam. Most topics are pretty predictable if you've been paying attention in class.

[fathergoose]

The seriously huge wall flowchart was not that helpful :/ Much more overwhelming than helpful.

I think the thing that helped me most for my exam was writing out answers to essays beforehand. I did a bunch of that, read the Emanuel cover to cover, and the Acing book and aced my exam.


When I took the actual exam, essays I had practiced showed up on the exam. Most topics are pretty predictable if you've been paying attention in class.

Thanks, that was helpful.

Any other helpful tips for doing well in IT from people who already took it?

[purr se]

I need to figure out what the hell a hotchpot is. I didn't pay attention to the term at first because I thought it was something he was making up to screw with us because there is no way that hotchpot is a real legal term but my prof used it approximately 5,000 times in class over the last two weeks. I'm guessing that means its important.

I think we're in the same class. AG?

[goosey]

Those with Chirelstein, are you reading it front to back or jumping around? Curious which would help make the most sense/see big picture etc.

I read through it front to back. It makes sense if you do it for a general understanding because it walks you through the order that you have to deal with stuff for the later stuff to make sense.

If you already have a general grasp and are just boning up on certain parts of your outline then I could see jumping around being helpful too though.

I am reading it as I outline...its helpful.

I have a question: when we went over deductible business expenses one of the main questions was whether it was a capital expenditure [which is not deductible but must be capitalized and recovered either through depreciation/ammortization or else upon sale] or else if it was a deductible business expense. Now we are going over capital gains and losses and the code says that everything is a capital asset except for [insert list here that I dont know off the top of my head]---one of the things listed is machinery used in the course of business. So how is it possible for something to go from being a capital expenditure in 162 or 212 to now being "ordinary" rather than capital gain/loss???? I am so confused!!! I thought machines were capital expenditures....then why no capital loss??? Is the word "capital" in the code simply a chameleon that changes definitions depending on the section???

[almercobb]

I have a question: when we went over deductible business expenses one of the main questions was whether it was a capital expenditure [which is not deductible but must be capitalized and recovered either through depreciation/ammortization or else upon sale] or else if it was a deductible business expense. Now we are going over capital gains and losses and the code says that everything is a capital asset except for [insert list here that I dont know off the top of my head]---one of the things listed is machinery used in the course of business. So how is it possible for something to go from being a capital expenditure in 162 or 212 to now being "ordinary" rather than capital gain/loss???? I am so confused!!! I thought machines were capital expenditures....then why no capital loss??? Is the word "capital" in the code simply a chameleon that changes definitions depending on the section???

In my outline from a couple of years ago I have:

3) Capital Gains and Losses
****
. c) Business Machinery & equipment, Goodwill, and Real Estate
. . i. Although business machinery & equipment, goodwill, and real estate are not "capital assets" (IRC § 1221(2)), when sold for a gain, the gain is taxed as a capital gain. (IRC § 1231).
. . . a) Gains are capital; losses are ordinary.
. . . b) Gains and losses in a single year must be netted.
. . . c) Gains are converted to ordinary to the extent of recorded losses in the last five years
[here I have a little hypo chart showing 5k 1231 loss in 2007, 3 k of 1231 loss in 2008, and 10k of 1231 gain in 2009. 8k of losses in last five years convert 8k of 2009 gains to ordinary: 8k ordinary gain & 2k capital gain.]
. . . d) gains affected by prior losses. Losses not affected by prior gains.

So the basic answer to your question is yes! "Capital" gets defined differently for depreciation and in 1221(2) and 1231.

[goosey]

another income tax question---dealing with interest deductions under 163

so interest payments arising from indebtedness for investment income is only deductible to extent of investment income---meaning its the same as gambling losses where you can't take the deduction beyond the gain from that class of activity. My question is, does this apply strictly to "Section 212" type investment activity---the kind that does not rise to the level of a trade or business under 162, or does it also apply to trade or business interest?

[Helmholtz]

another income tax question---dealing with interest deductions under 163

so interest payments arising from indebtedness for investment income is only deductible to extent of investment income---meaning its the same as gambling losses where you can't take the deduction beyond the gain from that class of activity. My question is, does this apply strictly to "Section 212" type investment activity---the kind that does not rise to the level of a trade or business under 162, or does it also apply to trade or business interest?

Doesn't Section 163(d)(3)(A) answer this ("property held for investment"), or am I misunderstanding your question.

[Renzo]

another income tax question---dealing with interest deductions under 163

so interest payments arising from indebtedness for investment income is only deductible to extent of investment income---meaning its the same as gambling losses where you can't take the deduction beyond the gain from that class of activity. My question is, does this apply strictly to "Section 212" type investment activity---the kind that does not rise to the level of a trade or business under 162, or does it also apply to trade or business interest?

No, you can't offset investment interest against trade/business gains, only "212-type" investment gains, per 163(d).
Edit: yeah, what Helmholtz said.

[BunkMoreland]

(5) Property held for investment
For purposes of this subsection -
(A) In general
The term ''property held for investment'' shall include -
(ii) any interest held by a taxpayer in an activity
involving the conduct of a trade or business -
(I) which is not a passive activity, and
(II) with respect to which the taxpayer does not
materially participate.

[gp86]

I thought machines were capital expenditures....then why no capital loss??? Is the word "capital" in the code simply a chameleon that changes definitions depending on the section???

Not sure if I'm reading this wrong, but a capital expenditure doesn't necessarily result in a capital asset.

[Helmholtz]

(5) Property held for investment
For purposes of this subsection -
(A) In general
The term ''property held for investment'' shall include -
(ii) any interest held by a taxpayer in an activity
involving the conduct of a trade or business -
(I) which is not a passive activity, and
(II) with respect to which the taxpayer does not
materially participate.

So it can be trade/business property, but not that which falls under passive activity or under material participation? Doesn't "passive activity" equal no material participation? What kind of trade/business activity involves neither passive activity nor material participation? (Am I misreading this? I'm not even sure we went over this section in class....)

Never mind. Figured it out on my own.

[deebs]

Never really went to class for fed income tax. Started to read chirelstein and was like, oh shit. Picked up the E&E and thought it was great for learning each topic, which codes apply, etc. Then went and read Chirelstein after. I think that order works best if you're as clueless as I was.

On to putting everything together... I'd love to see some practice tests that have model answers. The latest one I have access to is 1999 lol.

[BunkMoreland]

(5) Property held for investment
For purposes of this subsection -
(A) In general
The term ''property held for investment'' shall include -
(ii) any interest held by a taxpayer in an activity
involving the conduct of a trade or business -
(I) which is not a passive activity, and
(II) with respect to which the taxpayer does not
materially participate.

So it can be trade/business property, but not that which falls under passive activity or under material participation? Doesn't "passive activity" equal no material participation? What kind of trade/business activity involves neither passive activity nor material participation? (Am I misreading this? I'm not even sure we went over this section in class....)

Never mind. Figured it out on my own.

Yeah, it's what you said at first.

[Helmholtz]

(5) Property held for investment
For purposes of this subsection -
(A) In general
The term ''property held for investment'' shall include -
(ii) any interest held by a taxpayer in an activity
involving the conduct of a trade or business -
(I) which is not a passive activity, and
(II) with respect to which the taxpayer does not
materially participate.

So it can be trade/business property, but not that which falls under passive activity or under material participation? Doesn't "passive activity" equal no material participation? What kind of trade/business activity involves neither passive activity nor material participation? (Am I misreading this? I'm not even sure we went over this section in class....)

Never mind. Figured it out on my own.

Yeah, it's what you said at first.

But Section 163 does apply to trade/business activity involving a working interest in oil/gas property, even if there is no material participation, right?

[moandersen]

So no one made a flowchart or organized the tax sections into categories? OP?

[crEEp]

I just bought the kindle version of Chirelstein...I've got the exam in a few days, but at least I got to see Dexter last night.

[goosey]

why oh why cant i understand non-recognition rules for like kind exchanges!!! i swear i understood it in class!!!!!

i dnt understand the analysis for basis when there is boot!

omgggggg tax I HATE YOU SO MUCHHHHHH!!!!!!!!!!!!!!!!!!!!!!!!!! damn you for making the world go round and forcing me to [attempt to] understand you

::cries in a corner::
its 4 credits!!!!!!!!!!!

[Helmholtz]

why oh why cant i understand non-recognition rules for like kind exchanges!!! i swear i understood it in class!!!!!

i dnt understand the analysis for basis when there is boot!

omgggggg tax I HATE YOU SO MUCHHHHHH!!!!!!!!!!!!!!!!!!!!!!!!!! damn you for making the world go round and forcing me to [attempt to] understand you

::cries in a corner::
its 4 credits!!!!!!!!!!!

Did you try doing the E&E section on like-kind exchanges? It made things a lot clearer for me.

[goosey]

why oh why cant i understand non-recognition rules for like kind exchanges!!! i swear i understood it in class!!!!!

i dnt understand the analysis for basis when there is boot!

omgggggg tax I HATE YOU SO MUCHHHHHH!!!!!!!!!!!!!!!!!!!!!!!!!! damn you for making the world go round and forcing me to [attempt to] understand you

::cries in a corner::
its 4 credits!!!!!!!!!!!

Did you try doing the E&E section on like-kind exchanges? It made things a lot clearer for me.

doing it right now...was reading it and my brain literally felt like mush when I posted the above. ugh, freakin tax.

[de5igual]

quick question on §1245/50 recapture w/r/t installment sales in 453(i)(1)

the way I'm reading it is that if any of the gain in the installment sale is due to unrecaptured gains, then all of the unrecaptured gain needs to be recognized in year 1, even if you didn't receive any cash payment that year.

am i totally off-base here?

[fathergoose]

I don't have IT until next Wednesday and I've got multiple finals between now and then, soooo if anyone puts together a good flow chart/attack outline/etc. before then and wants to share I will buy you booze the next time you are in Texas.

[goosey]

I don't have IT until next Wednesday and I've got multiple finals between now and then, soooo if anyone puts together a good flow chart/attack outline/etc. before then and wants to share I will buy you booze the next time you are in Texas.

i have tax on the 23rd...am doing pre written answers and all kinds of bells and whistles...if you want to trust me, i will send it over to you when im done. you cant steal my grade all the way from texas.

[fathergoose]

I don't have IT until next Wednesday and I've got multiple finals between now and then, soooo if anyone puts together a good flow chart/attack outline/etc. before then and wants to share I will buy you booze the next time you are in Texas.

i have tax on the 23rd...am doing pre written answers and all kinds of bells and whistles...if you want to trust me, i will send it over to you when im done. you cant steal my grade all the way from texas.

You are the man (woman?...man...yeah...man...final answer).

I truly appreciate it.

[goosey]

I don't have IT until next Wednesday and I've got multiple finals between now and then, soooo if anyone puts together a good flow chart/attack outline/etc. before then and wants to share I will buy you booze the next time you are in Texas.

i have tax on the 23rd...am doing pre written answers and all kinds of bells and whistles...if you want to trust me, i will send it over to you when im done. you cant steal my grade all the way from texas.

You are the man (woman?...man...yeah...man...final answer).

I truly appreciate it.

woman.

and np, dad.