Exam 9: Acquisitions of Property

Tony receives an automobile from his uncle,Ned,as a graduation gift.Ned used the vehicle only for commuting to his office during the 3 years he owned it.Ned paid $20,000 for the vehicle.It is valued at $8,000 on the date of the gift.Tony will use the automobile 100% of the time for his business.Determine Tony's basis in the automobile for depreciation purposes.Explain your answer in terms of the concepts of taxation.

John purchases all of the common stock of Clarke Corporation for $280,000.The assets of the corporation are: Asset Adjusted Basis Fair Market Value Inventory \ 25,000 \ 50,000 Equipment 60,000 40,000 Supplies 20,000 20,000 Building 80,000 95,000 Land 10,000 20,000 \ 195,000 \ 225,000 What is John's basis in the common stock he acquired?

David pays $35,000 cash and issues a mortgage note for $95,000 to purchase land.He pays $750 to his attorney for reviewing the purchase agreement.David's initial basis in the land is

Dana purchases an automobile for personal use for $27,000.After using it for three years,Dana converts the automobile to business use when the fair market value is $19,000.What is Dana's basis for deprecation purposes?

Match each statement with the correct term below. -Direct purchase

Ted purchases some forest land in 2011 with the intention of building a log cabin to use as a vacation home.To obtain the land,Ted pays $10,000 cash,assumes the seller's $19,000 mortgage on the land and pays $3,000 in commissions and legal fees related to the purchase.In 2012,Ted pays a contractor $4,000 to bulldoze and level the site of the log cabin.In 2013,Ted has a well dug and water and sewer lines laid in the ground at a cost of $6,000.Ted paid $2,000 of property taxes in 2011 and $5,000 of property taxes in 2012 and 2013 on the land.What is Ted's basis in the land at the end of 2013?

Jenny purchased 1,000 shares of Hewlett Corporation preferred stock for $66,000 two years ago.During the current year,Jenny receives a 10% nontaxable stock dividend at a time when the stock has a fair market value of $40.What is Jenny's basis in the stock dividend shares?

Rosie inherits 1,000 shares of Northern Skies Airline Corporation stock from the estate of her Uncle Tony.Tony died on July 2,2013.The stock's value on July 2,2013,is $4,000.Tony's basis in the stock was $3,000.The stock has a fair market vale of $7,000 on October 1,2013,when it is transferred to her.Rosie sells the stock October 11,2014.What is Rosie's basis in the stock?

On June 10,2012,Akira receives a gift of a rare marble statue with a fair market value of $9,000.The marble statue had an adjusted basis of $12,000 to the donor and was purchased in 2011.Akira sells the marble statue July 5,2013,for $8,000.When does Akira's holding period for the rare marble statue begin?

For each of the following situations,identify the property's adjusted basis and briefly explain how you determined the adjusted basis amount. a.Mei-ling purchased 150 shares of MAPCO stock for $5,400 in 2000. On February 28, 2013, Mei-ling purchased another lot of 150 shares of identical stock for $3,750. Mei-ling sells the original 150 shares of MAPCO stock for $3,300 on March 15, 2013. What is Mei-ling's basis in the 150 shares she purchased February 28, 2013? b.Ralph gives Linda 500 shares of Money Maker common stock. The stock cost Ralph $30,000 several years earlier. The stock is worth $50,000 on the date it is given to Linda, and Ralph pays $1,500 of gift tax on the transfer. What is Linda's basis in the stock if she sells it for $20,000? c.Assume the same facts as in part b, except that the fair market value of the stock on the date of the gift is $25,000. d.Leon receives a van as a gift from his father. His father's basis in the van is $30,000. The fair market value at the date of the gift is $20,000. A gift tax of $2,000 is paid on the gift. Geroge uses the van in his pizza delivery service for three years, at which time he sells it for $8,000. During the three years he used the van in his business, Geroge deducts $10,000 in depreciation on the van. e.Bonita owns a house that she used as a residence until this year. She paid $150,000 for the house on November 4, 1992. On April 4, 2013, Bonita purchases a new residence and converts the former residence into office space to use in her real estate business. The former residence is worth $180,000 on April 4, 2013.

On June 10,2012,Wilhelm receives a gift of gold coins with a fair market value of $10,000.The gold coins had an adjusted basis of $12,000 to the donor.Wilhelm sells the gold coins August 1,2013,for $8,000.What is the amount of the recognized gain or loss on the sale?

Tillman is building a warehouse for use in his business.The construction costs include the following: Direct labor \ 35,000 Direct materials 20,000 Architect fees 5,000 Interest on construction loan 3,000 Depreciation of equipment used in construction 1,500 Indirect Administrative costs during construction 2,000 What is Tillman's basis in the warehouse?

Match each statement with the correct term below. -Real property

Match each statement with the correct term below. -Amount realized

During 2001,Charles purchased 1,000 shares of Ryan Corporation stock for $12,000.On February 22,2013,he sells all the shares for $9,000.On March 15,2013,he repurchases 1,000 shares of Ryan for $8,000 and holds them until May 29,2013,when he sells them for $10,000.What is Charles' recognized gain or loss on the May 29,2013,sale?

Match each statement with the correct term below. -Intangible property

Match each statement with the correct term below. -Holding period

When a security is sold at a loss and and a substantially identical security has been purchased within 30 days before the sale date the loss is disallowed because it is classified as a wash sale.

Mitaya purchased 500 shares of Sundown Inc.,common stock on December 13,2011,at a cost of $3,600.She paid a commission of $150 on the purchase.On February 18,2012,she received 250 shares of Sundown Inc.,common stock as a tax-free dividend.Mitaya sells 600 shares for $3,700 on January 8,2013,and pays a $100 commission on the sale.Mitaya's gain (loss)on the sale is characterized as:

Diane receives a gift of stock from Sue on July 2,2013,when the stock was trading for $20,000.Sue paid $4,000 for the stock several years ago.Sue pays a gift tax of $500 on the transfer.Diane's basis in the stock is: