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

In computing the amount realized when the fair market value of the property received cannot be determined, the fair market value of the property surrendered may be used.

Joseph converts a building adjusted basis of $50,000 and fair market value of $40,000) from personal use to business use. Justin receives a building with a $40,000 fair market value $50,000 donor's adjusted basis) from his mother as a gift. Discuss the tax consequences with respect to Joseph's and Justin's adjusted basis.

The adjusted basis for a taxable bond purchased at a premium is reduced if the amortization election is made. The amount of the amortized premium is treated as an interest deduction.

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

A realized gain on the sale or exchange of a personal use asset is recognized, but a realized loss on the sale, exchange, or condemnation of a personal use asset is not recognized.

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.

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

In a deductible casualty or theft, the basis of property involved is reduced by the amount of insurance proceeds received and by any resulting recognized loss.

Karen purchased 100 shares of Gold Corporation stock for $11,500 on January 2, 2018. During 2018, she sells 25 shares of the 100 shares purchased on January 2, 2018, for $2,500. Twenty-five days earlier, she had purchased 30 shares for $3,000. What is Karen's recognized gain or loss on the sale of the stock, and what is her basis in the 30 shares purchased 25 days earlier?

Jason owns Blue Corporation bonds face value of $10,000), purchased on January 1, 2018, for $11,000. The bonds have an annual interest rate of 3% and a maturity date of December 31, 2027. If Jason elects to amortize the bond premium, what is his taxable interest income for 2018 and the adjusted basis for the bonds at the end of 2018 assuming straight-line amortization is appropriate)?

Valarie purchases a rental house and land for $180,000 during a depressed real estate market. Appraisals place the value of the house at $140,000 and the land at $60,000 a total of $200,000). What is Valarie's basis in the house?

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.

If the alternate valuation date is elected by the executor in 2018, the total basis of inherited property will be more than what it would have been if the primary valuation date and amount had been used.

If a taxpayer purchases taxable bonds at a premium, the amortization of the premium is elective. However, if a taxpayer purchases tax-exempt bonds at a premium, the amortization of the premium is mandatory. Explain this difference in the treatment.

Discuss the effect of a liability assumption on the seller's amount realized and the buyer's adjusted basis.

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.

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?

If the amount of a corporate distribution is less than the amount of the corporate earnings and profits, the return of capital concept does not apply and the shareholders' adjusted basis for the stock remains unchanged.

Mary sells her personal use automobile for $20,000. She purchased the car two years ago for $17,000. What is Mary's recognized gain or loss? It increased in value due to its excellent mileage, yet safe design.

The amount of the loss basis of a gift will differ from the amount of the gain basis only if at the date of the gift the adjusted basis of the property exceeds the property's fair market value.