Depreciation, Like-Kind Exchanges and Related Parties
This topic covers depreciation, amortization, section 179, bonus depreciation, recapture, like-kind exchanges, involuntary conversions, installment sales, and related-party consequences.
How to study for CPA REG
Build every answer around taxpayer type, tax year, filing obligation, basis, character, limitation, and procedural consequence.
Core concepts
Concept 1
Depreciation, Like-Kind Exchanges and Related Parties questions test whether a CPA candidate can apply tax law, federal procedure, business law, or entity tax rules to a practical client fact pattern.
Exam cue: Identify the taxpayer type, tax year, transaction, return, authority, and dollar amount or deadline being tested.
Concept 2
The best REG answer usually identifies the taxpayer, transaction, year, tax basis, filing obligation, limitation, and procedural consequence before calculating.
Exam cue: Decide whether the task is inclusion, deduction, credit, basis, gain or loss, filing, penalty, representation, or legal liability.
Concept 3
Eliminate answers that skip statutory requirements, mix individual and entity rules, ignore basis, overlook filing deadlines, or choose a tax result without checking limitations.
Exam cue: Check limitations, character, timing, basis ordering, related-party rules, and whether the amount belongs on an individual or entity return.
Risk pitfalls and guardrails
Calculating taxable income before separating exclusions, adjustments, deductions, credits, and separately stated items.
Guardrail: Use a 15-second safety pause before finalizing your action.
Applying entity-level tax rules to owners, or owner-level limitations to the entity itself.
Guardrail: Use a 15-second safety pause before finalizing your action.
Ignoring statute of limitations, preparer penalty, Circular 230, estimated tax, or filing-status details that control the answer.
Guardrail: Use a 15-second safety pause before finalizing your action.
Memory anchors
Depreciation
Depreciation recovers the cost of qualifying tangible property over a prescribed recovery period.
Section 179
Section 179 permits immediate expensing of qualifying property subject to limits.
Bonus Depreciation
Bonus depreciation allows accelerated cost recovery for qualifying property when available.
Recapture
Recapture can convert gain from a property sale into ordinary income.
Like-Kind Exchange
A like-kind exchange can defer gain when qualifying real property is exchanged and requirements are met.
Boot
Boot is non-like-kind property or cash received in an exchange and may trigger recognized gain.
Involuntary Conversion
An involuntary conversion may allow gain deferral if replacement requirements are met.
Installment Sale
An installment sale reports gain as payments are received unless an exception applies.
Amortization
Amortization recovers the cost of certain intangible assets over time.
Related-Party Sale
Related-party sale rules can limit losses, change timing, or recharacterize gain.
Checkpoint rule
Do the check-up only after you can summarize each concept in one sentence and identify one dangerous pitfall from memory.
Knowledge Check (after reading)
Short check-up to confirm understanding of this module.
Check-up Questions
Which asset is depreciable?
A business buys a machine on December 20 but does not install or make it ready for use until January 8. When does depreciation begin?
Answer all questions to submit.
Next step personalized recommendations
Continue learning
Move forward only after this module is stable.
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