A taxable event often occurs as a result of a property transaction. The Internal Revenue Code historically has defined the taxable consequences of such transactions according to (1) the type of property, e.g., real or personal, and (2) the purpose for which the property was held, e.g., personal, or trade or business. The 1986 Tax Reform Act complicated this analysis further by adopting the concept of “baskets of income,” that is, income deriving from property is characterized as (a) active, (b) passive, or (c) portfolio, depending upon the taxpayer’s relationship to the property at issue. Understanding these income baskets and the proper planning opportunities arising from each promises to be a major challenge for the financial planner.

This module will introduce the various tax considerations associated with the acquisition of property. Included in this area are the cost recovery rules, including Section 179. Also contained in this module are the rules related to the disposition of business assets, including the rules related to Section 1231, Section 1245, and Section 1250. The chapters in this module are:

Author: Michael B. Cates, MS, CFP®

Michael B. Cates, MS, CFP® joined the College in 1986, and is the professor for the Income Tax Planning course of the CFP Certification Professional Education Program. He received his CFP® certification in 1995, and completed the College’s Master of Science degree program in 1997. Mike is also the lead professor for the introductory Income Tax Planning course in the College’s master’s program. In addition to his responsibilities at the College, Mike also maintains a tax planning and preparation firm in Aurora, Colorado. You can reach Mike at mike.cates@cffp.edu.

Complexity Level: Intermediate