Exam 5: Property Transactions: Capital Gains and Losses

Dustin purchased 50 shares of Short Corporation for $500. During the current year, Short declared a nontaxable 10% stock dividend. What is the basis per share before and after the stock dividend is distributed?

Josh purchases a personal residence for $278,000 but subsequently converts the property to rental property when its FMV is $275,000. Assume depreciation of $65,000 has been deducted after conversion to rental use. If Josh sells the property for $280,000, his gain or loss will be

On January 31 of the current year, Sophia pays $1,000 for an option to acquire 100 shares of Texas Corporation common stock for $105 per share at any time prior to December 31. As of December 31 Sophia had not exercised the option or sold it. Which of the following statements is correct?

If property received as a gift has a basis of the fair market value of the property on the date of the gift, the donee's holding period starts on the day after the date of the gift.

Joycelyn gave a diamond necklace to her granddaughter Emma. Joycelyn had purchased the necklace in 1980 for $15,000. The FMV of the necklace at the time of the gift was $44,000. After deducting the annual exclusion, the amount of the gift was $30,000. Gift taxes of $10,000 were paid. What is Emma's adjusted basis in the necklace?

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

Topaz Corporation had the following income and expenses during the current year: What is Topaz's taxable income?

Section 1221 specifically states that inventory or property held primarily for sale to customers is not classified as a capital asset of the trade or business.

A taxpayer purchased an asset for $50,000 several years ago. He is now planning to sell it. Under the recovery of basis doctrine the taxpayer will not recognize any gain or pay any related taxes unless he sells the asset for more than $50,000.

In a common law state, jointly owned property left to the surviving spouse will have a basis after the estate is settled equal to

If Houston Printing Co. purchases a new printing press during the current year for $30,000, pays sales taxes of $2,000, and pays $1,000 for installation, the cost basis for the printing press is $33,000.

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?

Billy and Sue are married and live in Texas, a community property state. They jointly own real property with an adjusted basis of $200,000. When the property has a FMV of $450,000, Billy dies leaving all of the property to Sue. If she later sells the property for $650,000, what is Sue's gain on the sale?

With regard to taxable gifts after 1976, no gift tax is added to the basis of the property if the donor's basis is greater than the FMV of the property.

Dale gave property with a basis of $16,000 to Sarah when it had a FMV of $12,000. No gift taxes were due. Sarah later sold the property for $22,000 resulting in a recognized gain of

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.

Losses are generally deductible if incurred in carrying on a trade or business or incurred in an activity engaged in for profit.

Gertie has a NSTCL of $9,000 and a NLTCG of $5,500 during the current taxable year. After gains and losses are offset, Gertie reports

The initial adjusted basis of property depends upon how the property is acquired.

Taxpayers who own mutual funds recognize their share of capital gains even if no distributions are received.