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

​Nontaxable stock dividends result in no change to the total basis of the old and new stock,but the basis per share decreases.

Explain how the sale of investment property at a loss to a brother is treated differently from a sale to a niece.

Tobin inherited 100 acres of land on the death of his father in 2015.A Federal estate tax return was filed and the land was valued at $300,000 (its fair market value at the date of the death).The father had originally acquired the land in 1972 for $19,000 and prior to his death had made permanent improvements of $6,000.What is Tobin's basis in the land?

Terry exchanges real estate (acquired on August 25,2009) held for investment for other real estate to be held for investment on September 1,2015.None of the realized gain of $10,000 is recognized,and Terry's adjusted basis for the new real estate is a carryover basis of $80,000.Consequently,Terry's holding period for the new real estate begins on August 25,2009.

Hilary receives $10,000 for a 15-foot wide utility easement along one of the boundaries to her property.The easement provides that no structure can be built on that portion of the property.Her adjusted basis for the property is $200,000 and the easement covers 15% of the total acreage.Determine the effect of the $10,000 payment on Hilary's gross income and her basis for the property.

Cole exchanges an asset (adjusted basis of $15,000;fair market value of $25,000) for another asset (fair market value of $19,000).In addition,he receives cash of $6,000.If the exchange qualifies as a like-kind exchange,his recognized gain is $6,000 and his adjusted basis for the property received is $21,000 ($15,000 + $6,000 recognized gain).

Casualty losses and condemnation losses on the involuntary conversion of a personal residence receive the same tax treatment.

If a husband inherits his deceased wife's share of jointly owned property in a common law state,both the husband's original share and the share inherited from the deceased wife are stepped-up or down to the fair market value at the date of the wife's death.

What kinds of property do not qualify under the like-kind provisions?

Elvis owns all of the stock of White Corporation.The accumulated earnings and profits of White Corporation at the beginning of the year are a deficit of $20,000.The current earnings and profits are $30,000.Elvis' basis for his stock is $250,000.He receives a distribution of $300,000 on the last day of the tax year.How much dividend income and/or capital gain should Elvis report?

Expenditures made for ordinary repairs and maintenance of property are not added to the original basis in the determination of the property's adjusted basis whereas capital expenditures are added to the original basis.

Discuss the treatment of realized gains from involuntary conversions.

Kendra owns a home in Atlanta.Her company transfers her to Chicago on January 2,2015,and she sells the Atlanta house in early February 2015.She purchases a residence in Chicago on February 3,2015.On December 15,2015,Kendra's company transfers her to Los Angeles.In January 2016,she sells the Chicago residence and purchases a residence in Los Angeles.Because multiple sales have occurred within a two-year period,§ 121 treatment does not apply to the sale of the second home.

​Explain how the sale of investment property at a loss to a brother is treated differently from a sale to a nephew.

Section 1033 (nonrecognition of gain from an involuntary conversion) applies to both gains and losses.

Bud exchanges a business use machine with an adjusted basis of $22,000 and a fair market value of $30,000 for another business use machine with a fair market value of $28,000 and $2,000 cash.What is Bud's recognized gain or loss?

Since wash sales do not apply to gains,it may be desirable to engage in this type of transaction before the end of the tax year.

For the loss disallowance provision under § 267,related parties include certain family members,a shareholder and his or her controlled corporation (i.e. ,greater than 50% in value of the corporation's outstanding stock),and a partner and his or her controlled partnership (i.e. ,greater than 50% of the capital interests or profits interest in the partnership).

During 2015,Zeke and Alice,a married couple,decided to sell their residence,which had a basis of $200,000.They had owned and occupied the residence for 20 years.To make it more attractive to prospective buyers,they had the inside painted in April at a cost of $5,000 and paid for the work immediately.They sold the house in May for $800,000.Broker's commissions and other selling expenses amounted to $50,000.They purchased a new residence in July for $400,000.What is the recognized gain and the adjusted basis of the new residence?

The bank forecloses on Lisa's apartment complex.The property had been pledged as security on a nonrecourse mortgage,whose principal amount at the date of foreclosure is $750,000.The adjusted basis of the property is $480,000,and the fair market value is $750,000.What is Lisa's recognized gain or loss?