The Ownership and Disposition of Property
Introduction to Chapters 12 through 15
By this point in the course, you already know quite a lot about the acquisition, ownership, and
disposition of property. Chapter 1 introduced you to the basic principles, and you have learned in
the last unit how debt affects § 1012 cost basis and § 1001(b) amount realized. Nevertheless, there
are still a few more topics to be explored under this broad heading.
Chapter 12 will first consider the proper accounting for § 1001 gain or loss, including a
discussion of accounting for inventory sales and installment sales. The bulk of the chapter,
however, will be spent exploring several nonrecognition or deferral provisions.
Chapter 13 will review the rate of basis recovery in the case of debt instruments and compare
it to the rate of basis recovery under the depreciation and related provisions. It will also explore
the new limits on the business interest deduction imposed under the TCJA.
You became acquainted in Chapter 1 with the fact that “net capital gain” is subject to a lower
tax rate than “ordinary” gain or income and that “capital” losses that are otherwise deductible
under § 165 are subject to deduction restrictions in §§ 1211 and 1212 that are not applicable to
ordinary losses. It was important to introduce you to these important concepts early because they
have affected so many of the topics that we have already explored. Now is the time, however, to
take a closer look at these rules and to introduce you to some additional ones, such as depreciation
recapture and § 1231 gains and losses. Welcome to Chapter 14!
Finally, Chapter 15 will consider the topic of tax shelters. While the subject may not appear to
fit precisely within the topic of property ownership and disposition, I think that all of the
knowledge that you have learned up to this point in the course comes together to make this a good
point in time to examine the problem. Thus, I shoehorn it in right here.