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

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Question 1

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The amount received for a utility easement on land is included in the gross income of the taxpayer.

A) True
B) False

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Question 2

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Discuss the application of holding period rules to property acquired by gift and inheritance.

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The holding period for inherited propert...

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Why is it generally undesirable to pass property by death when its fair market value is less than basis?

Expenditures made for ordinary repairs and maintenance of property are not added to the original basis in the determination of the property's adjusted basis whereas capital expenditures are added to the original basis.

Jason owns Blue Corporation bonds (face value of $10,000) ,purchased on January 1,2015,for $11,000.The bonds have an annual interest rate of 8% and a maturity date of December 31,2024.If Jason elects to amortize the bond premium,what is his taxable interest income for 2015 and the adjusted basis for the bonds at the end of 2015 (assuming straight-line amortization is appropriate) ?

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.

Lynn purchases a house for $52,000.She converts the property to rental property when the fair market value is $115,000.After deducting depreciation (cost recovery) expense of $1,130,she sells the house for $120,000.What is her recognized gain or loss?

Molly exchanges a small machine (adjusted basis of $85,000;fair market value of $78,000) used in her business and investment land (adjusted basis of $10,000;fair market value of $15,000) for a large machine (fair market value of $93,000) to be used in her business in a like-kind exchange.What is Molly's recognized gain or loss?

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

A taxpayer who sells his or her principal residence at a realized loss can elect to recognize the loss even if a qualified residence is acquired during the statutory time period.

Melvin receives stock as a gift from his uncle.No gift tax is paid.The adjusted basis of the stock is $30,000 and the fair market value is $38,000.Melvin trades the stock for bonds with a fair market value of $35,000 and $3,000 cash.What is his recognized gain and the basis for the bonds?

Ralph gives his daughter,Angela,stock (basis of $8,000;fair market value of $6,000) .No gift tax results.If Angela subsequently sells the stock for $10,000,what is her recognized gain or loss?

Explain how the sale of investment property at a loss to a brother is treated differently from a sale to a niece.

For disallowed losses on related-party transactions,who has the right of offset?

The exchange of unimproved real property located in Topeka (KS)for improved real property located in Atlanta (GA)does not qualify as a like-kind exchange.

In determining the basis of like-kind property received,postponed losses are:

In addition to other gifts,Megan made a gift of stock to Jeri in 1976.Megan had purchased the stock in 1974 for $7,500.At the time of the gift,the stock was worth $20,000.If Megan paid $850 of gift tax on the transaction in 1976,what is Jeri's gain basis for the stock?

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.

Lump-sum purchases of land and a building are allocated on the basis of the relative fair market values of the individual assets acquired.

Sandra's automobile,which is used exclusively in her trade or business,was damaged in an accident.The adjusted basis prior to the accident was $11,000.The fair market value before the accident was $10,000 and the fair market value after the accident is $6,000.Insurance proceeds of $3,200 are received.What is Sandra's adjusted basis for the automobile after the casualty?