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

Isabella Iverson bought a new car for $17,500. She received a rebate from the manufacturer in the amount of $1,000. Her basis in the car is $17,500.

Margo Manor has a Victorian style residence with an adjusted basis of $200,000 and a fair market value of $150,000. Because of the unique styling of the home, she decided to convert it to rental property. One year later, after taking depreciation of $15,000, she is considering selling the property. Determine the results if she sells the property for: (a.) $130,000 (b.) $165,000 (c.) $220,000

Unless the taxpayer can specifically identify the shares of stock that are sold or transferred, the FIFO rule comes into play (i.e., the stock sold is charged against the earliest of the stock purchases).

In a gain situation, the holding period of gift property begins on the date of the gift.

In 2008, Jane Jones pays $2,500 for 1,000 shares of ABC common stock. On August 27, 2012, Jane purchases an additional 250 shares of ABC common stock for $600. On September 5, 2012, she sells the 1,000 shares purchased in 2008 for $1,800. Jane's recognized loss on the sale is:

ftere is a basis adjustment for estate taxes paid on property acquired from a decedent that is similar to the gift tax adjustment of gifted property.

For purposes of the related party rules, the taxpayer's parents are "related persons," but the taxpayer's siblings (brothers and sisters) are not.

In 2008, Jane Jones pays $2,500 for 1,000 shares of ABC common stock. On August 27, 2012, Jane purchases an additional 250 shares of ABC common stock for $600. On September 5, 2012, she sells the 1,000 shares purchased in 2008 for $1,800. Jane's basis in the shares of stock purchased on August 27, 2012 is:

Jay Jamison sold property to Joan Jacobs. Joan paid $100,000 in cash and $20,000 in other property (fair market value). fte property sold by Jay was subject to an $80,000 mortgage, which Joan assumed. Jay paid a $7,200 sales commission and $5,000 in property taxes. Jay had purchased the property three years before for $120,000- $20,000 in cash and a $100,000 mortgage. Jay had added $20,000 in improvements during the period of time in which he held the property. What is Jay's realized gain or loss on this transaction?

Recognized gain or loss is the term used to describe:

Ralph Rugby wanted to sell 100 shares of a stock that had suffered a serious decline in value. Several members of his family were interested in purchasing the stock. In order to preserve the loss deduction, which of the following family members should Ralph sell his stock to?

Freda Freemont receives a nontaxable stock dividend of 30 shares of preferred stock on her Georgia Corporation common stock. Freda purchased the 200 shares of common stock two years ago for $12,000. On the date of distribution, the fair market value of the common stock was $75 per share and the fair market value of the preferred was $100 per share. What is the new basis, per share, of the preferred stock?

Bill Burns purchases furniture from his employer for $5,000 during 2012. fte fair market value of the furniture is $8,500. What is Bill's basis in the furniture?

George Greco gave Harold Hudson property which George acquired five years ago for $15,000. At the time of the gift, the property's fair market value was $35,000. Harold subsequently sold the property for $40,000. What amount of gain did Harold realize?

Dan Danielson bought 100 shares of stock on October 20, 2012. On December 23, 2012, Dan died and his son David inherited the stock. David's basis in the stock is the fair market value at the time of Dan's death.

Freda Freemont receives a nontaxable stock dividend of 30 shares of preferred stock on her Georgia Corporation common stock. Freda purchased the 200 shares of common stock two years ago for $12,000. On the date of distribution, the fair market value of the common stock was $75 per share and the fair market value of the preferred was $100 per share. What is the new basis, per share, of the common stock?

Leonard London sold a building used in his business to Michelle Martinson. He had purchased the property several years previously for $340,000, $300,000 of which was the mortgage. Major improvements in the amount of $240,000 had been made. At the time of the sale, Leonard had taken $220,000 in straight-line depreciation. Leonard paid $104,000 in selling expenses. Michelle gave Leonard $400,000 in cash and unlike property with a fair market value of $240,000, assumed a delinquent real estate bill of $105,000 and assumed Leonard's mortgage on the property in the amount of $234,000. What is Leonard's gain on the sale?

When a taxpayer realizes a loss on the sale of securities and purchases the same or substantially identical securities within 61 days surrounding the date of the sale, this is known as:

Stanley Steamer purchased 1,000 shares of Patrick Corporation common stock at $6 per share in 2008. On September 26, 2012, he received 1,000 nontaxable stock rights entitling him to buy 200 additional shares of Patrick Corporation common stock at $10 per share. On the day that the rights were issued, the fair market value of the stock was $12.50 per share ex-rights and that of the rights was $2.50 each. Stanley sold 500 of the rights for $1,100 on October 24, 2012, and let the other 500 rights expire. (a.) What is the gain or loss that Stanley should report in 2012? (b.) What gain or loss should Stanley report if the value of the rights were $1.25 instead of $2.50?

Bill Burns purchases furniture from his employer for $5,000 during 2012. fte fair market value of the furniture is $8,500. What amount, if any, must Bill include as income for 2012?