Exam 13: Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges-Part 1

Shontelle received a gift of income-producing property with an adjusted basis of $41,000 to the donor and fair market value of $38,000 on the date of gift.Gift tax of $6,000 was paid by the donor.Shontelle subsequently sold the property for $36,000.What is the recognized gain or loss?

Cassie purchases a sole proprietorship for $145,000.The fair market value of the tangible assets is $110,000 and the agreed to value of goodwill is $10,000.Assuming there are no other intangible assets, Cassie's basis for the tangible assets is $132,917 ($110,000 + $22,917) and her basis for the goodwill is $12,083 ($10,000 + $2,083).

Iva owns Mauve, Inc.stock (adjusted basis of $40,000) which she sells to Joshua, her brother, for its fair market value of $32,000.Fifteen months later, he sells it to Faye, a friend, for its fair market value of $39,000.Determine Iva's recognized loss, Joshua's recognized gain or loss, and Faye's adjusted basis for the stock. Iva's recognized loss Joshua's recognized gain or loss Faye's basis

Jamie bought her house in 2007 for $395,000. Since then, she has deducted $70,000 in depreciation associated with her home office and has spent $45,000 replacing all the old pipes and plumbing. She sells the house on July 1, 2012. Her realtor charged $34,700 in commissions. Prior to listing the house with the realtor, she spent $300 advertising in the local newspaper. Sammy buys the house for $500,000 in cash, assumes her mortgage of $194,000, and pays property taxes of $4,200 for the entire year on December 1, 2012. What is Jamie's adjusted basis at the date of the sale and the amount realized?

Khalid sells two personal use assets during the taxable year. A gain of $6,000 is realized on the sale of one asset and a loss of $2,000 is realized on the sale of the other asset. What is the recognized gain or loss?

If property that has been converted from personal use to business use has appreciated in value, its basis for gain will be the same as the basis for loss.

Lenny and Beverly have been married and living together in Lenny's home for 6 years.He lived in the home alone for 20 years prior to their marriage.They sell the home, which has an adjusted basis of $120,000, for $700,000.Lenny and Beverly plan to use the § 121 exclusion (exclusion of gain on sale of principal residence).In Beverly's prior marriage to Dan, Dan sold his principal residence and used the § 121 exclusion.Beverly and Dan filed joint returns during their seven years of marriage.They had lived in Dan's house throughout their marriage.Dan's sale had occurred one year prior to the divorce.Lenny and Beverly purchase a replacement residence for $650,000 one month after the sale.What is the recognized gain and basis for the new home?

Samantha gives her son, Steve, stock (basis of $72,000; fair market value of $68,000) and no gift tax results. When Steve subsequently sells the stock for $69,000, his recognized gain or loss is:

Katie sells her personal use automobile for $15,000.She purchased the car four years ago for $31,000.What is Katie's recognized gain or loss?

The basis of property acquired in a wash sale is its cost plus the loss recognized on the wash sale.

This year, Fran receives a birthday gift of stock worth $75,000 from her aunt.The aunt has owned the stock (adjusted basis $50,000) for 10 years and pays gift tax of $27,000 on the transfer.Fran's basis in the stock is $75,000-the lesser of $77,000 ($50,000 + $27,000) or $75,000.

Pat owns a 1965 Mustang car which he uses for personal use.He purchased it four years ago for $22,000, and it currently is worth $27,000.He exchanges it for a 1979 Triumph Spitfire convertible worth $27,000.Pat's recognized gain is $0 and his adjusted basis for the convertible is $22,000.

Leta has a fiscal tax year which ends on June 30th. Her factory building is destroyed by a fire on October 12, 2012. Two months later, she receives insurance proceeds large enough to produce a realized gain. In order to elect § 1033 postponement, Leta must acquire qualified replacement property by December 31, 2014.

In October 2012, Ben and Jerry exchange investment realty in a § 1031 like-kind exchange.Ben bought his real estate in 2002 while Jerry purchased his in 2005.In addition to the realty, Ben receives Pearl, Inc.stock worth $10,000 from Jerry.Ben's realized gain is $30,000.On what date does the holding period for Ben's realty received from Jerry begin? When does the holding period for the stock he receives begin?

A donee receives depreciable property worth $85,000 (basis to donor of $150,000) with no gift tax being paid on the transfer.The donee's basis for depreciation purposes is $85,000.

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).

Nontaxable stock dividends result in:

An office building with an adjusted basis of $320,000 was destroyed by fire on December 30, 2012.On January 11, 2013, the insurance company paid the owner $450,000.The fair market value of the building was $500,000, but under the co-insurance clause, the insurance company is responsible for only 90 percent of the loss.The owner reinvested $410,000 in a new office building on February 12, 2013, that was smaller than the original office building.What is the recognized gain and the basis of the new building if § 1033 (nonrecognition of gain from an involuntary conversion) is elected?

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.

The exchange of unimproved real property located in Topeka (KS) for improved real property located in Atlanta (GA) does not qualify as a like-kind exchange.