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

Lynn transfers her personal use automobile to her business (a sole proprietorship).The car's adjusted basis is $35,000 and the fair market value is $12,000.No cost recovery had been deducted by Lynn, since she held the car for personal use.Determine the adjusted basis of the car to Lynn's sole proprietorship including the basis for cost recovery.

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.

Felix gives 100 shares of stock to his daughter, Monica. The stock was acquired in 2003 for $20,000, and at the time of the gift, it had a fair market value of $60,000. Felix paid a gift tax of $6,000.

How is the donee's basis calculated for the gift of appreciated property for a gift made before 1977? Assume the donor pays gift tax.

After 5 years of marriage, Dave and Janet decided to get a divorce.As part of the divorce settlement, Janet transfers to Dave the house she purchased prior to their marriage.Janet's adjusted basis for the house is $125,000 and the fair market value is $200,000 on the date of the transfer.What are the tax consequences to Janet and to Dave as a result of the transfer?

What types of exchanges of insurance contracts are eligible for nonrecognition treatment under § 1035?

Discuss the relationship between the postponement of realized gain under § 1031 (like-kind exchanges) and the adjusted basis and holding period for the replacement property.

Inez's adjusted basis for 9,000 shares of Cardinal, Inc.common stock is $900,000.During the year, she receives a 5% stock dividend that is a nontaxable stock dividend.

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

What is the difference between the depreciation (or cost recovery) allowed and the depreciation (or cost recovery) allowable and what effect does each have on the adjusted basis of property?

Melissa, age 58, marries Arnold, age 50, on June 1, 2012.Melissa decides to sell her principal residence on August 1, 2012, which she has owned and occupied for the past 30 years.Arnold has never owned a house.However, while he was married to Kelly who died 6 months prior to his marriage to Melissa, Kelly used the § 121 election on the sale of her residence in January 2010 to reduce her realized gain from $123,000 to $0.Kelly used the sales proceeds to pay off Arnold's gambling debts.Can Melissa elect the § 121 exclusion on the sale of her residence? What is the maximum § 121 exclusion available to Melissa and Arnold if they file a joint return?

If a taxpayer purchases taxable bonds at a premium, the amortization of the premium is elective.However, if a taxpayer purchases tax-exempt bonds at a premium, the amortization of the premium is mandatory.Explain this difference in the treatment.

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 recognized gain on the sale?

Discuss the treatment of realized gains from involuntary conversions.

Joseph converts a building (adjusted basis of $50,000 and fair market value of $40,000) from personal use to business use.Justin receives a building with a $40,000 fair market value ($50,000 donor's adjusted basis) from his mother as a gift.Discuss the tax consequences with respect to Joseph's and Justin's adjusted basis.

What is the easiest way for a taxpayer who is going to sell property that has declined in value to avoid the § 267 loss disallowance provision?

Tariq sold certain U.S.Government bonds and State of Oregon bonds at a loss to offset short-term capital gain from a previous transaction.He felt that the U.S.Government and State of Oregon bonds were "good" investments, so he repurchased identical securities within one week.Do these transactions constitute wash sales?

Why is it generally undesirable to pass property by death when its fair market value is less than basis?

Edward, age 52, leased a house for one year in Memphis with an option to buy as his personal residence.At the end of the lease, he purchased the house.He lived there for an additional 26 months before his employer transferred him to Tucson.Expecting to be in Tucson for 18 to 24 months, he rented the Memphis house for 18 months with an option to extend on a month to month basis for an additional 6 months.At the end of the 18-month period, Edward's employer offered him a permanent position in Tucson as branch manager.The tenant who had been occupying Edward's house in Memphis purchased it at the end of the 24-month extended lease period.Is Edward eligible to elect exclusion treatment under § 121?

Sammy exchanges equipment used in his business in a like-kind exchange.The property exchanged is as follows: The other party assumes the liability.