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Exam 14: Property Transactions Determination of Gain and Loss and Basic Considerations

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Question 71

True/False

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If insurance proceeds are received for property used in a trade or business,a casualty transaction can result in recognized gain,but cannot result in a recognized loss.

A) True
B) False

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Question 72

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Helen purchases a $10,000 corporate bond at a premium of $1,000 and elects to amortize the premium.On the later sale of the bond for $10,800,she has amortized $300 of the premium.Helen has a recognized gain of $800 ($10,800 amount realized - $10,000 adjusted basis).

A) True
B) False

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Question 73

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Paul sells property with an adjusted basis of $45,000 to his daughter Dean,for $38,000.Dean subsequently sells the property to her brother,Preston,for $38,000.Three years later,Preston sells the property to Hun,an unrelated party,for $50,000.What is Preston's recognized gain or loss on the sale of the property to Hun?

If the alternate valuation date is elected by the executor of the estate,the basis of all of the property included in the decedent's estate becomes the fair market value 6 months after the decedent's death.

Jamie bought her house in 2008 for $395,000.Since then,she has deducted $70,000 in depreciation associated with her home office and has spent $45,000 replacing all the old pipes and plumbing.She sells the house on July 1,2016.Her realtor charged $34,700 in commissions.Prior to listing the house with the realtor,she spent $300 advertising in the local newspaper.Sammy buys the house for $500,000 in cash,assumes her mortgage of $194,000,and pays property taxes of $4,200 for the entire year on December 1,2016.What is Jamie's adjusted basis at the date of the sale and the amount realized?

Arthur owns a tract of undeveloped land (adjusted basis of $145,000) which he sells to his son,Ned,for its fair market value of $105,000.What is Arthur's recognized gain or loss and Ned's basis in the land?

Gene purchased an SUV for $45,000 which he uses 100% for personal purposes.When the SUV is worth $30,000,he contributes it to his business.The gain basis is $45,000,the loss basis is $30,000,and the basis for cost recovery is $45,000.

Abby sells real property for $300,000.The buyer pays $5,000 in property taxes that had accrued during the year while the property was still legally owned by Abby.In addition,Abby pays $15,000 in commissions and $3,000 in legal fees in connection with the sale.How much does Abby realize (the amount realized) from the sale of her property?

The holding period of property acquired by gift may begin on:

Melody's adjusted basis for 10,000 shares of Cardinal,Inc.common stock is $1,000,000.During the year,she receives a 5% stock dividend that is a nontaxable stock dividend. a.What is the amount of Melody's gross income? b.What is Melody's total basis for the stock? c.What is Melody's basis per share?

Hilary receives $10,000 for a 15-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.

Shontelle received a gift of income-producing property with an adjusted basis of $49,000 to the donor and fair market value of $35,000 on the date of gift.No gift tax was paid by the donor.Shontelle subsequently sold the property for $31,000.What is the recognized gain or loss?

What is the general formula for calculating the adjusted basis of property?

Katie sells her personal use automobile for $12,000.She purchased the car three years ago for $25,000.What is Katie's recognized gain or loss?

Kevin purchased 5,000 shares of Purple Corporation stock at $10 per share.Two years later,he receives a 5% common stock dividend.At that time,the common stock of Purple Corporation had a fair market value of $12.50 per share.What is the basis of the Purple Corporation stock,the per share basis,and gain recognized upon receipt of the common stock dividend?

Marsha transfers her personal use automobile to her business (a sole proprietorship).The car's adjusted basis is $30,000 and the fair market value is $16,000.No cost recovery had been deducted by Marsha,since she held the car for personal use.Determine the adjusted basis of the car to Marsha's sole proprietorship including the basis for cost recovery.

If a husband inherits his deceased wife's share of jointly owned property in a common law state,both the husband's original share and the share inherited from the deceased wife are stepped-up or down to the fair market value at the date of the wife's death.

Tariq sold certain U.S.Government bonds and State of Oregon bonds at a loss to offset short-term capital gain from a previous transaction.He felt that the U.S.Government and State of Oregon bonds were "good" investments,so he repurchased identical securities within one week.Do these transactions constitute wash sales? If the bond sales resulted in the recognition of gain (rather than loss),would the wash sale provisions prevent the gains from being recognized?

Transactions between related parties that result in disallowed losses might later provide a tax benefit to the related party buyer.

On September 18,2016,Jerry received land and a building from Ted as a gift.Ted had purchased the land and building on March 5,2013,and his adjusted basis and the fair market value at the date of the gift were as follows: Asset Adjusted Basis FMV Land $150,000 $200,000 Building 90,000 100,000 Ted paid no gift tax on the transfer to Jerry. a.Determine Jerry's adjusted basis and holding period for the land and building. b.Assume instead that the FMV of the land was $89,000 and the FMV of the building was $60,000.Determine Jerry's adjusted basis and holding period for the land and building.