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Exam 7: Property Transactions: Basis, gain and Loss, and Nontaxable Exchange

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Question 121

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After 5 years of marriage,Dave and Janet decided to get a divorce.As part of the divorce settlement,Janet transfers to Dave the house she purchased prior to their marriage.Janet's adjusted basis for the house is $230,000 and the fair market value is $410,000 on the date of the transfer.What are the tax consequences to Janet and to Dave as a result of the transfer?

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Janet has a realized gain of $180,000 ($...

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Question 122

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The basis of inherited property usually is its fair market value on the date of the decedent's death.

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Question 123

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Emma gives her personal use automobile (cost of $32,000; fair market value of $12,000)to her son,Louis,on July 3,2013.She has owned the automobile since July 1,2010. a. What is Louis basis for the car? b. When does his holding period begin?

Bud exchanges a business use machine with an adjusted basis of $22,000 and a fair market value of $30,000 for another business use machine with a fair market value of $28,000 and $2,000 cash.What is Bud's recognized gain or loss?

For each of the following involuntary conversions,determine if the property qualifies as replacement property.

Which of the following might motivate a taxpayer to try to avoid like-kind exchange treatment?

Hilary receives $10,000 for a 7-foot wide utility easement along one of the boundaries to her property.The easement provides that no structure can be built on that portion of the property.Her adjusted basis for the property is $200,000 and the easement covers 15% of the total acreage.Determine the effect of the $10,000 payment on Hilary's gross income and her basis for the property.

If a taxpayer purchases taxable bonds at a premium,the amortization of the premium is elective.However,if a taxpayer purchases tax-exempt bonds at a premium,the amortization of the premium is mandatory.Explain this difference in the treatment.

The fair market value of property received in a sale or other disposition is the price at which property will change hands between a willing seller and a willing buyer when neither is compelled to sell or buy.