Exam 14: Property Transactions Determination of Gain and Loss and Basic Considerations

The basis of personal use property converted to business use is:

Sam and Cheryl,husband and wife,own property jointly.The property has an adjusted basis of $400,000 and a fair market value of $500,000. a.Discuss the rules for the calculation of the adjusted basis of the property to Sam if he inherits his wife's share of the property and Sam and Cheryl live in a community property state. b.If they live in a common law state?

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?

Mona purchased a business from Judah for $1,000,000.Judah's records and an appraiser provided her with the following information regarding the assets purchased: Adjusted Basis FMV Land $195,000 $270,000 Building 310,000 450,000 Equipment 95,000 180,000 ​ What is Mona's adjusted basis for the land,building,and equipment?

The taxpayer owns stock with an adjusted basis of $15,000 and a fair market value of $8,000.If the stock or cash is going to be given to her niece,it is preferable for the taxpayer to sell the stock and give the $8,000 of cash to her niece.The same preference would exist if the recipient were a qualified charitable organization.

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,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?

Steve purchased his home for $500,000.As a sole proprietor,he operates a certified public accounting practice in his home.For this business,he uses one room exclusively and regularly as a home office.In Year 1,$3,042 of depreciation expense on the home office was deducted on his income tax return.In Year 2,Steve sustained losses in his business;therefore,no depreciation was taken on the home office.Had he been allowed to deduct depreciation expense,his depreciation expense would have been $3,175.What is the adjusted basis in the home?

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

Annette purchased stock on March 1,2016,for $200,000.At December 31,2016,it was worth $210,000.She also purchased a bond on September 1,2016,for $20,000.At year end,it was worth $15,000.Determine Annette's realized and recognized gain or loss.

Ed and Cheryl have been married for 27 years.They own land jointly with a basis of $300,000.Ed dies in 2016,when the fair market value of the land is $500,000.Under the joint ownership arrangement,the land passed to Cheryl. a.If Ed and Cheryl reside in a community property state,what is Cheryl's basis in the land? b.If Ed and Cheryl reside in a common law state,what is Cheryl's basis in the land?

The amount received for a utility easement on land is included in the gross income of the taxpayer.

Yolanda buys a house in the mountains for $450,000 which she uses as her personal vacation home.She builds an additional room on the house for $40,000.She sells the property for $560,000 and pays $28,000 in commissions and $4,000 in legal fees in connection with the sale.What is the recognized gain or loss on the sale of the house?

Realized gain or loss is measured by the difference between the amount realized from the sale or other disposition of property and the property's adjusted basis at the date of disposition.

Reggie owns all the stock of Amethyst,Inc.(adjusted basis of $100,000).If he receives a distribution from Amethyst of $90,000 and corporate earnings and profits are $15,000,Reggie has a capital gain of $5,000 and an adjusted basis for his Amethyst stock of $0.

Under what circumstances will a distribution by a corporation to its only shareholder result in a capital gain?

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

On January 15 of the current taxable year,Merle sold stock with a cost of $40,000 to his brother Ned for $25,000,its fair market value.On June 21,Ned sold the stock to a friend for $26,000. a.What are the tax consequences to Merle and Ned? b.Would Ned recognize any gain if he sold the stock for $41,000?

Which of the following statements is false?

Marilyn owns 100% of the stock of Lilac,Inc. ,with an adjusted basis of $45,000.She receives a cash distribution of $160,000 from Lilac when its earnings and profits are $90,000. a.What is Marilyn's dividend income? b.What is Marilyn's recognized gain or loss? c.What is Marilyn's adjusted basis for her stock after the distribution?

Wade is a salesman for a real estate development company.Because he is the "salesperson of the year," he is permitted to purchase a lot from the developer for $90,000.The fair market value of the lot is $150,000 and the developer's adjusted basis is $100,000.Wade must recognize a gain of $10,000 ($100,000 developer's adjusted basis - $90,000 cost to Wade),and his adjusted basis for the lot is $100,000 ($90,000 cost + $10,000 recognized gain).