Exam 13: Property Transactions: Determination of Gain or Loss, basis Considerations, and Nontaxabl

Wyatt sells his principal residence in December 2015 and qualifies for the § 121 exclusion.He sells another principal residence in November 2016.Under no circumstance can Wyatt qualify for the § 121 exclusion on the sale of the second residence.

Discuss the effect of a liability assumption on the seller's amount realized and the buyer's adjusted basis.

When a property transaction occurs,what four questions should be considered with respect to the sale or other disposition?

Robert and Diane,husband and wife,live in Pennsylvania,a common law state.They purchased land as joint tenants in 2011 for $300,000.In 2015,Diane dies and bequeaths her share of the land to Robert.The land has a fair market value of $450,000.What is Robert's adjusted basis for the land?

Maurice sells his personal use automobile at a realized loss.Under what circumstances can Maurice deduct the loss? What if the personal use asset was sold at a realized gain?

Jan purchases taxable bonds with a face value of $250,000 for $265,000.The annual interest paid on the bonds is $10,000.Assume Jan elects to amortize the bond premium.The total premium amortization for the first year is $1,600. a.What is Jan's interest income for the first year? b.What is Jan's interest deduction for the first year? c.What is Jan's adjusted basis for the bonds at the end of the first year?

Carl sells his principal residence,which has an adjusted basis of $150,000 for $200,000.He incurs selling expenses of $20,000 and legal fees of $2,000.He had purchased another residence one month prior to the sale for $380,000.What is the recognized gain or loss and the basis of the replacement residence if the taxpayer elects to forgo the § 121 exclusion (exclusion of gain on sale of principal residence)?

Omar has the following stock transactions during 2015: Stock Date purchased Number of shares sold Number of shares Basis Selling price Orange 1/2013 100 $1,000 Blue 6/2013 200 3,000 Yellow 4/2014 50 1,250 Blue 2/2015 150 1,800 Yellow 3/2015 175 5,250 Blue 7/2015 250 $3,500 Yellow 11/2015 200 7,200 ​ a.​ ​ What is Omar's recognized gain or loss on the stock sales if his objective is to minimize the recognized gain and to maximize the recognized loss? b.What is Omar's recognized gain or loss if he does not identify the shares sold? ​

Alice owns land with an adjusted basis of $610,000,subject to a mortgage of $350,000.Real estate taxes are $9,000 per calendar year and are payable on December 31.On April 1,2015,Alice sells her land subject to the mortgage for $650,000 in cash,a note for $600,000,and property with a fair market value of $120,000.What is the amount realized?

Joyce's office building was destroyed in a fire (adjusted basis of $350,000;fair market value of $400,000).Of the insurance proceeds of $360,000 she receives,Joyce uses $310,000 to purchase additional inventory and invests the remaining $50,000 in short-term certificates of deposit.She received only $360,000 because of a co-insurance clause in her insurance policy.What is Joyce's recognized gain or loss?

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?

The taxpayer must elect to have the exclusion of gain under § 121 (sale of principal residence) apply.

Discuss the logic for mandatory deferral of realized gain or loss for a § 1031 like-kind exchange.

Neal and his wife Faye reside in Texas,a community property state.Their community property consists of real estate (adjusted basis of $800,000;fair market value of $6 million) and personal property (adjusted basis of $390,000;fair market value of $295,000).Neal dies first and leaves his estate to Faye.What is Faye's basis in the property after Neal's death?

Carlton purchases land for $550,000.He incurs legal fees of $10,000 and broker's commission of $28,000 associated with the purchase.He subsequently incurs additional legal fees of $25,000 in having the land rezoned from agricultural to residential.He subdivides the land and installs streets and sewers at a cost of $800,000.What is Carlton's basis for the land and the improvements?

Mandy and Greta form Tan,Inc. ,by transferring the following assets to the corporation in exchange for 5,000 shares of stock each. Mandy: Cash of $450,000 Greta: Land (worth $450,000;adjusted basis of $90,000). How much gain must Tan recognize on the receipt of these assets?

​Ralph gives his daughter,Angela,stock (basis of $8,000;fair market value of $6,000).No gift tax results.If Angela subsequently sells the stock for $10,000,what is her recognized gain or loss?

A taxpayer who sells his or her principal residence at a realized loss can elect to recognize the loss even if a qualified residence is acquired during the statutory time period.

Hubert purchases Fran's jewelry store for $950,000.The identifiable assets of the business are as follows: ​ Basis FMV Inventory $ 90,000 $ 97,000 Accounts receivable 55,000 50,000 Building 100,000 225,000 Land 280,000 300,000 Hubert and Fran agree to assign $110,000 to a 7-year covenant not to compete.How should Hubert allocate the $950,000 purchase price to the assets?

Melvin receives stock as a gift from his uncle.No gift tax is paid.The adjusted basis of the stock is $30,000 and the fair market value is $38,000.Melvin trades the stock for bonds with a fair market value of $35,000 and $3,000 cash.What is his recognized gain and the basis for the bonds?