Exam 14: Property Transactions: Determination of Gain or Loss and Basis Considerations

Albert purchased a tract of land for $140,000 in 2015 when he heard that a new highway was going to be constructed through the property and that the land would soon be worth $200,000. Highway engineers surveyed the property and indicated that he would probably get $180,000. The highway project was abandoned in 2018 and the value of the land fell to $100,000. What is the amount of loss Albert can claim in 2018?

The wash sales rules apply to both gains and losses.

Which of the following is correct?

The holding period for property acquired by gift is automatically long term.

Tobin inherited 100 acres of land on the death of his father in 2018. A Federal estate tax return was filed and the land was valued at $300,000 its fair market value at the date of the death). The father had originally acquired the land in 1975 for $19,000 and prior to his death had made permanent improvements of $6,000. What is Tobin's basis in the land?

Define fair market value as it relates to property transactions.

The carryover basis to a donee for property received by gift can be an amount greater than the donor's adjusted basis.

The adjusted basis of an asset is the original cost or basis) plus capital recoveries less capital additions.

Realized gain or loss is measured by the difference between the amount realized from the sale or other disposition of property and the property's adjusted basis at the date of disposition.

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?

A realized loss whose recognition is postponed results in the temporary recovery of more than the taxpayer's cost or other basis.

Terry owns Lakeside, Inc. stock adjusted basis of $80,000), which she sells to her brother, Jake, for $64,000 its fair market value). Eighteen months later, Jake sells the stock to Pamela, a friend, for $78,000 its fair market value). What is Terry's recognized loss, Jake's recognized gain or loss, and Pamela's adjusted basis for the stock? Terry's Recognized Loss Jake's Recognized GainLoss) Pamela's Basis

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

The basis for depreciation on depreciable gift property received is the donor's adjusted basis of the property at the date of the gift assuming no gift taxes are paid). The rule applies regardless of whether the fair market value at the date of the gift is greater than or less than the donor's adjusted basis.

For a corporate distribution of cash or other property to a shareholder, when does dividend income or a return of capital result?

Carlton purchases land for $550,000. He incurs legal fees of $10,000 and broker's commission of $28,000 associated with the purchase. He subsequently incurs additional legal fees of $25,000 in having the land rezoned from agricultural to residential. He subdivides the land and installs streets and sewers at a cost of $800,000. What is Carlton's basis for the land and the improvements?

On February 1, Karin purchases real estate for $375,000. The annual property taxes of $5,040 are payable on December 31. Realizing that she will pay the property taxes for the entire year, Karin remits $374,580 to the seller at closing. Karin's adjusted basis for the real estate is:

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

If the buyer assumes the seller's liability on the property acquired, the seller's amount realized is decreased by the amount of the liability assumed.

If a seller assumes the buyer's liability on the property acquired, the buyer's adjusted basis for the property is increased by the amount of the liability assumed.