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Accounting Periods and Property Transactions - Essay Example

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Summary

This paper 'Accounting Periods and Property Transactions' tells us that the difference between the estimated amount in gross income and the exact amount should be taken into account in the current tax year, not the tax year of determination. This will benefit the taxpayers in that there will be no risk of change in the currency value…

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Accounting Periods and Property Transactions

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Subject: Finance & Accounting
Type: Essay
Level: Masters
Pages: 1 (250 words)
Downloads: 2
Author: evelyn96

Extract of sample "Accounting Periods and Property Transactions"

Suppose there are two family members with US citizenship; one works in Australia while the other is in the US. The one in the US had purchased a piece of land while the one in Australia owns a rental house in Australia. The two family members decide to exchange the ownership of the two properties; a house and land.

Postponing paying tax is one of the strategies of maximizing tax avoidance and minimizing IRS scrutiny (Jacqueline, 2012). One pays tax whenever he/she sells a property and gains. To avoid the case of obvious gain (which will make you pay tax), one can directly reinvest the proceeds in similar property as part of a qualifying like-kind exchange. For example, suppose you want to sell off your land and buy a rental house. You may have a gain in cash if your land has higher value compared to the rental house you want to buy; if there is cash exchange. To avoid tax, you can find a rental house with a higher value than your land and exchange. Thus, although you may have gained, is it a like-exchange for similar property hence you will not pay tax.

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