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

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?

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

Nontaxable stock dividends result in:

Which of the following statements is false?

If the fair market value of the property on the date of death is greater than on the alternate valuation date, the use of the alternate valuation amount is mandatory.

Robert sold his ranch, which was his principal residence, during the current taxable year.At the date of the sale, the ranch had an adjusted basis of $460,000 and was encumbered by a mortgage of $200,000.The buyer paid him $500,000 in cash, agreed to take the title subject to the $200,000 mortgage, and agreed to pay him $100,000 with interest at 6 percent one year from the date of sale.How much is Robert's realized gain on the sale?

Milton purchases land and a factory building for his business for $300,000 with $100,000 being allocated to the land. During the first year, Milton deducts cost recovery of $4,922.Milton's adjusted basis for the building at the end of the first year is $195,078 ($200,000 - $4,922).

Parker bought a brand new Ferrari on January 1, 2019, for $125,000.Parker was fatally injured in an auto accident on June 23, 2019, when the fair market value of the car was $105,000.Parker was driving a loaner car from the Ferrari dealership while his car was being serviced.In his will, Parker left the Ferrari to his best friend, Ryan.Ryan's holding period for the Ferrari begins on January 1, 2019.

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? $\quad$ a. \- 0- \- 0- \7 8,000 b. \- 0- \ 14.000 \ 64.000 c. \- 0- \ 14,000 \ 78,000 d. \1 6,000 \ 14,000 \ 78,000 e. $\text { None of these. }$

Annette purchased stock on March 1, 2019, for $200,000.At December 31, 2019, it was worth $210,000.She also purchased a bond on September 1, 2019, for $20,000.At year-end, it was worth $15,000.Determine Annette's realized and recognized gain or loss.

Purchased goodwill is assigned a basis equal to cost, which is calculated using the residual method associated with the purchase of a business.

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?

In general, the amount realized from a sale of property does not include any liability assumed by the buyer.

Ken is considering two options for selling land for which he has an adjusted basis of $100,000 and on which there is a mortgage of $80,000.Under the first option, Ken will sell the land for $225,000 with a stipulation in the sales contract that he liquidate the mortgage before the sale is complete.Under the second option, Ken will sell the land for $145,000, and the buyer will assume the mortgage.Calculate Ken's recognized gain under both options.

The basis for gain and loss of personal use property converted to business use is the lower of the adjusted basis or the fair market value on the date of conversion.

On January 2, 2019, Todd converts his house into a rental property.Todd's basis in the house is $400,000, and its fair market value on the date of conversion is $376,000.What is Todd's basis for purposes of MACRS cost recovery?

Lump-sum purchases of land and a building are allocated on the basis of the relative fair market values of the individual assets acquired.

A loss from the sale of a personal use asset that would be disallowed cannot be recognized even if the taxpayer converts the asset to business use prior to its sale.

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.

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.