Exam 13: Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges-Part 2

What effect does a deductible casualty loss have on the adjusted basis of property?

On January 5, 2012, Waldo sells his principal residence with an adjusted basis of $270,000 for $690,000.He has owned and occupied the residence for 15 years.He pays $35,000 in commissions and $2,000 in legal fees in connection with the sale.One month before the sale, Waldo painted the exterior of the house at a cost of $5,000 and repaired various items at a cost of $3,000.On October 15, 2012, Waldo purchases a new home for $600,000.On November 15, 2013, he pays $25,000 for completion of a new room on the house, and on January 14, 2014, he pays $15,000 for the construction of a pool.What is the Waldo's recognized gain on the sale of his old principal residence and what is the basis for the new residence?

Emma gives her personal use automobile (cost of $29,000; fair market value of $15,000) to her son, Louis, on July 3, 2012. She has owned the automobile since July 1, 2009.

Ed and Cheryl have been married for 27 years.They own land jointly with a basis of $300,000.Ed dies in 2012, when the fair market value of the land is $500,000.Under the joint ownership arrangement, the land passed to Cheryl.

What is a deathbed gift and what tax consequences apply?

Annette purchased stock on March 1, 2012, for $165,000.At December 31, 2012, it was worth $171,000.She also purchased a bond on September 1, 2012, for $20,000.At year end, it was worth $16,000.Determine Annette's realized and recognized gain or loss.

Discuss the relationship between realized gain and boot received in a § 1031 like-kind exchange.

Define fair market value as it relates to property transactions.

Monica sells a parcel of land to her son, Elbert, for $90,000.Monica's adjusted basis is $100,000.Three years later, Elbert gives the land to his fiancée, Karen.At that date, the land is worth $104,000.No gift tax is paid.Since Elbert is going to be stationed in the U.S.Army in Germany for 3 years, they do not plan on being married until his tour is completed.Six months after receiving the land, Karen sells it for $110,000.At the same time, Karen sends Elbert a "Dear John" email.Calculate Karen's realized and recognized gain or loss.

How does the replacement time period differ for the condemnation of real property used in a trade or business or held for investment when compared with that for other involuntary conversions?

To be eligible to elect postponement of gain treatment for an involuntary conversion, what are the three tests for qualifying replacement property?

Marge purchases the Kentwood Krackers, a AAA level baseball team, for $1.5 million.The appraised values of the identified assets are as follows: The Krackers have won the pennant for the past two years.Determine Marge's adjusted basis for the assets of the Kentwood Krackers.

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

If a taxpayer purchases a business and the price exceeds the fair market value of the listed assets, how is the excess allocated among the purchased assets?

Amy's manufacturing plant is destroyed by fire on the afternoon of October 25, 2012. The adjusted basis is $550,000. The insurance company offers a settlement of $520,000. After protracted negotiations, Amy receives $575,000 on June 20, 2013. Amy is a fiscal year taxpayer whose tax year ends on June 30th. What is the latest date that Amy can invest the proceeds in qualifying replacement property and elect to defer the gain under § 1033?

Louis owns a condominium in New Orleans which has been his principal residence for 12 years.He wants to be near Lake Ponchartrain since he enjoys water activities.Therefore, he sells the condominium.His original intent was to purchase a house in New Orleans near the lake.However, the cost of such properties far exceeded his sales proceeds.He was able to purchase a house on the lake in Covington, which is located across the causeway.He invested all of his sales proceeds in the Covington house.After two months of commuting over an hour to and from work each day, he decides to rent an efficiency apartment in New Orleans near his office.He spends the weekends and vacations at his home in Covington.

Butch sells land with an adjusted basis of $88,000 and a fair market value of $160,000 to Cynthia, his wife, for $160,000.Discuss how the tax consequences would differ if Butch and Cynthia had never been married.

Lois received nontaxable stock rights with a fair market value of $4,000.The fair market value of the stock on which the rights were received is $24,000 (cost $14,000).Assume the rights are exercised by paying $31,000 plus the rights.Discuss how to calculate the basis of the old stock and the basis of the new stock.

Katrina, age 58, rented (as a tenant) the house that was her principal residence from January 1, 2012 through December 31, 2013.She purchased the house on January 1, 2014, for $150,000 and continued to occupy it through June 30, 2015.She leased it to a tenant from July 1, 2015, through December 31, 2016.On January 1, 2017, she sells the house for $350,000.She incurs a realtor's commission of $20,000.Calculate her recognized gain if her objective is to minimize the recognition of gain and she does not intend to acquire another residence.

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