Exam 10: Property Transactions: Determination of Basis and Gains and Losses

Depreciation, depletion, amortization, and acquisition costs are all capital returns.

In November 2012, Bill Barley sells property with an adjusted basis of $50,000 for $200,000. fte buyer pays Bill $40,000 cash at the time of sale transaction with the remaining $160,000 to be paid in five annual installments of $32,000 beginning in November 2013 with interest at 10 percent. (a.) What is the amount of income to be reported by Bill in 2012? (b.) What is the amount of income to be reported in later years? In both cases, ignore interest.

In 2012, Tom Turner received a gift of property that had a fair market value of $10,000 at the time of the gift. fte donor's adjusted basis in the property at the time of the gift was $12,000. Tom's basis for computing depreciation is $12,000.

fte fair market value of taxable stock rights at the date of distribution represents both the amount of income and the basis of the rights.

Which of the following items is not a reduction to the basis of an asset?

Lem Lumberjack sells 100 shares (basis of $5,000) of Redwood Corporation common stock on March 8, 2012, for $4,000. On March 29, 2012, Lem purchases 50 shares of Redwood Corporation common stock for $2,500. Lem's recognized loss on the sale is:

Betty Bell owns 1000 shares of Banner Corp. stock purchased in January 2010 for $30,000. On January 11, 2012, she receives 300 taxable stock rights valued at $6 with the right to purchase additional shares at $32. (a.) How much income does Betty have? What is the basis in the rights? When does the holding period of the rights begin? (b.) On February 19, 2013, Brian exercises 150 rights and sells the remaining 150 rights for $8 each. What is the basis of each new share? When does the holding period begin? How much and what kind of gain does she have on the sale of the rights?

Doug Doolittle receives a nontaxable stock dividend of 20 shares of Edwards Corporation common stock with a fair market value at distribution of $800. Doug previously owned 100 shares of Edwards Corporation common stock which he purchased three years ago for $6,000. fte basis per share of the 20 shares of Edwards Corporation stock is:

On October 7, 2012, Grace Gems purchased a going business for the lump-sum price of $200,000. fte fair market values of the assets Grace purchased were as follows: What is Grace's basis in the building?

fte basis of property acquired from a decedent is the fair market value of the property at the date of receipt of the property.

Marcia Marks received as a wedding present from an old friend a gold necklace worth $22,000. fte necklace had been purchased by the friend for $25,000. fte friend did not pay any gift tax. Marcia ran into some financial difficulty and sold the necklace for $23,000. Marcia must recognize a gain of $1,000. 35. 500 shares of the Yellow Brick Construction Company were sold for $10,000, its fair market value, by Esmeralda Emerson to her sister, Topaz, for $8,500. Esmeralda has a nondeductible loss of $1,500.

On April 18, 2012, Jim Jenkins sold 300 shares of Redwood Corporation common stock for $8,400. Jim acquired the stock in 2008 at a cost of $10,000. On May 9, 2012, he repurchased 150 shares of Redwood Corporation common stock for $3,600 and held them until August 25, 2012, when he sold them for $6,000. How should Jim report the above transactions for 2012?

Becky Bell owned common stock in a corporation that she purchased two years ago for $25,000. On June 6, 2012, Becky sold the stock for its $11,000 fair market value to her son, Max Monroe. On December 19, 2012, Max sells the stock to an unrelated party for its $13,000 fair market value. How much gain or loss will Becky and Max recognize on their respective income tax returns for 2012?

Joe Jimson died in 2012. Property with an adjusted basis of $60,000 and a fair market value of $120,000 went to Joe's beneficiary. fte executor chose the alternate valuation date when the value was $112,000. fte property was distributed four months after Joe's death when the fair market value was $115,000. What is the basis of the property to the beneficiary?

Douglas Duke received a summer home from his father as a gift in 2012. fte fair market value at the time of the gift was $90,000 (this was also the taxable gift), and it had an adjusted basis to the father of $50,000. fte father paid $9,000 in gift tax. What is Douglas's basis in the property?

John Johnson sold his hot dog stand at a loss to his brother. fte loss is deductible by John.

February 20, 2012: Lee Ranger purchased 100 shares of Pine Corp. stock for $30 a share. April 7, 2012: Lee sold 50 shares of Pine Corp. stock for $20 a share. April 24, 2012: Lee purchased 25 shares of Pine Corp. stock for $25 a share. What is the basis of the 25 shares purchased on April 24, 2012?

Elizabeth Eason constructed an asset to be used in her business-a sole proprietorship. fte basis she used for the finished asset should include the employee compensation for the work attributable to the construction of the asset.

Kurt Kramer purchased stock five years ago for $12,000 which he gave to Jim Jensen when its fair market value was $9,000. Subsequently, Jim sold the stock for $7,500. What is the amount of Jim's loss on the sale?

fte adjusted basis of property is its cost plus capital recoveries less capital expenditures.