Exam 10: Property Transactions: Capital Gains and Losses

Mike,a dealer in securities and calendar-year taxpayer,purchased a security for inventory on November 18,2014 for $15,000.The FMV on December 31,2014 was $16,000.The security was sold on December 19,2015 for $16,500.These transactions result in

What type of property should be transferred to heirs at a decedent's death and why? Should estate planning also mean that some property is transferred prior to death? Why?

Mike sold the following shares of stock in 2015: What are the tax consequences of these transactions,assuming his marginal tax rate is (a)33% and (b)39.6%? Ignore the medicare tax on net investment income.

Empire Corporation purchased an office building for $500,000 cash on April 1.Prior to renting it out to tenants on July 1,Empire spent $200,000 on materials and labor to renovate the property.It funded $50,000 of the renovation cost with its own funds and borrowed the remaining $150,000.As of July 1,$2,000 of interest had been paid to the bank,but none of the principal had been repaid.The basis of the building on July 1 is

Which one of the following does not affect the adjusted basis of a house held as rental property?

Expenditures which do not add to the value or prolong the life of property may be expensed in the year in which they are incurred.

Melody inherited 1,000 shares of Corporation Zappa stock from her mother who died on March 4 of the current year.Her mother paid $30 per share for the stock on September 2,2005.The FMV of the stock on the date of death was $65 per share.On September 4 of the current year,the FMV of the stock was $70 per share.Melody sold the stock for $85 per share on December 3.The estate qualified for,and the executor elected,the alternate valuation method for these and other assets in the estate.An estate tax return was filed.What was Melody's basis in the stock on the date of the sale?

Antonio is single and has taxable income of $150,000 without considering the sale of a capital asset (land held for investment)in September of 2015 for $25,000.That asset was purchased six years earlier and has a tax basis of $5,000.The tax liability applicable to only the capital gain (without consideration of the additional Medicare tax)is

Joy purchased 200 shares of HiLo Mutual Fund on July 15,2011,for $10,500,and has been reinvesting dividends.On December 15,2015,she sells 100 shares. What is the basis for the shares sold assuming (1)FIFO and (2)average cost method?

Emma Grace acquires three machines for $80,000,which have FMVs of $32,000,$28,000,and $20,000 respectively.The delivery cost is $500,and installation costs amount to $2,500.What is the basis of each machine?

An uncle gifts a parcel of land to his niece,and he has to pay $25,000 of gift taxes.The land has appreciated substantially since he purchased it 20 year ago.The niece's basis in the land will be the uncle's cost plus the full $25,000 of gift taxes paid by the uncle.

Will exchanges a building with a basis of $35,000,and subject to a liability of $30,000,for land with a FMV of $50,000 owned by Jane.Jane takes the land subject to the liability.The amount realized by Will is

In 2011 Toni purchased 100 shares of common stock in Blue Corporation for $5,280.In 2012,Blue declared a stock dividend of one share of its common stock for each 10 shares held.This year,2014,Blue's common stock split 2 for 1 at a time when the FMV was $80 a share.What is Toni's basis in each of her shares of the Blue Corporation stock if both distributions were tax-free?

Trista,a taxpayer in the 33% marginal tax bracket sold the following capital assets this year: What is the amount of and nature of (LT or ST)capital gain or loss? Be specific as to the rates at which gains,if any,are taxed.

Funds borrowed and used to pay for an asset are not included in the cost until the borrowed funds are repaid.

Terra Corp.purchased a new enterprise software system and incurred the following costs: What is Terra Corp.'s basis in the software system?

Jack exchanged land with an adjusted basis of $65,000 subject to a liability of $22,000 for $50,000 (FMV)of stock owned by Hayden.Hayden takes the land subject to the liability.Jack incurs $500 of selling expenses.What is the amount of Jack's realized gain on the exchange?

Abra Corporation generated $100,000 of taxable income from operations this year and realized a $4,000 loss on the sale of Starbucks stock.Abra Corporation will pay taxes on $97,000 of taxable income.

In the current year,Andrew received a gift of property from his uncle.At the time of the gift,the property had a FMV of $114,000 and an adjusted basis to his uncle of $70,000.After deducting the annual exclusion,the amount of the gift was $100,000.Andrew's uncle paid a gift tax on the property of $24,000.What is the amount of Andrew's basis in the property?

Arthur,age 99,holds some stock purchased many years ago for $10,000 which is now worth $100,000.He is trying to plan for the eventual disposition of this stock.Arthur's only remaining family member is his grandson.For income tax purposes,Arthur should