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

In order for an executor of an estate to elect the alternate valuation date, an estate tax return must be filed and the alternate valuation must be less than the FMV as of the decedent's death.

Under a divorce agreement, R was required to transfer his share of the jointly owned home to his ex-wife, L.The home cost $72,000 and was worth $124,000 at the time of the transfer.R has no gain and L's basis is $72,000.

M sold 10 shares of Ford Motor Co.at a gain through his broker on December 30, 2012.M must report the gain on his 2012 return.

Which statement below is true with regard to property transactions?

Allowable depreciation reduces the basis of an asset whether the depreciation is deducted or not.

If a taxpayer converts business property to personal use before selling it, he or she will be prohibited from deducting a loss on the sale.

C sold 300 shares of IBM stock for $5,200.She had paid $3,000 for the stock.Commissions of $300 on the sale and $180 on the purchase were paid.How much are C's amount realized and her gain realized, respectively, on this sale?

R sold the family homestead to his daughter for $250,000 at a time when its fair market value was $400,000.R's basis was $130,000.How much gain does R realize on the transaction?

Several years ago, E received 50 acres of undeveloped land as a gift from her grandmother.The land had cost $20,000 15 years ago, but was appraised at $50,000 on the date of the gift.E's grandmother paid gift taxes of $12,000 on this $36,000 taxable gift ($50,000 fair value - $14,000 annual gift tax exclusion).If E sells the land this year for $32,000 (net of selling expenses), what is her gain or loss on the sale?

Where there is no intent to demolish a building at the time of acquisition, the amount of loss on the building may be deducted at the time of subsequent demolition.

A and E are a married couple living in a community property state.E owned an apple orchard in which she had a basis of $70,000.She sold the orchard to A last year for its fair market value of $100,000.They remain happily married.What gain did E recognize on the sale?

Which one of the following losses may be recognized?

F sold 30 shares of GMX stock to R, her husband, for its fair market value of $1,500.F's basis in the stock was $1,200, so she recognizes a gain of $300.

Liabilities are included in the amount realized only if the seller was personally liable for their payment.

Gain or loss is realized any time there is a sale or other disposition of property.

The abandonment of property used in a business or income-producing activity generally results in a loss equal to the property's adjusted basis.

Which statement is not true concerning installment contracts and unstated interest?

D owns a new pizza restaurant.She converted her home, which she had purchased for $75,000 for use in the business when it was worth $70,000.Which of the following is not true of the home's basis for the business?

N sold a summer cabin to Y for $30,000 in cash and a recreational vehicle.Y had an adjusted basis in the RV of $15,000 at the time of the sale, although its fair market value was $22,000.N had an adjusted basis in the cabin of $44,000.Assume there were no selling costs.What was N's realized gain or (loss)?

A bargain sale of property to a qualified charity can result in both a charitable deduction and gain recognition.