Exam 14: Property Transactions: Determination of Gain or Loss and Basis Considerations

Broker's commissions,legal fees,and points paid by the seller reduce the seller's amount realized.

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).

Over the past 20 years,Alfred has purchased 380 shares of Green,Inc. ,common stock.His first purchase was in 1993 when he acquired 30 shares for $20 a share.In 1998,Alfred bought 150 shares at $10 a share.In 2013,Alfred acquired 200 shares at $50 a share.Alfred intends to sell 125 shares at $60 per share in the current year (2014).If Alfred's objective is to minimize gain and assuming he can adequately identify the shares to be sold,what is his recognized gain?

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?

Andrew acquires 2,000 shares of Eagle Corporation stock for $100,000 on March 31, 2010. On January 1, 2014, he sells 125 shares for $5,000. On January 22, 2014, he purchases 135 shares of Eagle Corporation stock for $6,075. When does Andrew’s holding period begin for the 135 shares?

Marge purchases the Kentwood Krackers,a AAA level baseball team,for $1.5 million.The appraised values of the identified assets are as follows: Prepaid season tickets \ 150,000 Stadium lease 400,000 Player contracts 500,000 Equipment 100,000 The Krackers have won the pennant for the past two years.Determine Marge's adjusted basis for the assets of the Kentwood Krackers.

Lynn purchases a house for $52,000.She converts the property to rental property when the fair market value is $115,000.After deducting depreciation (cost recovery)expense of $1,130,she sells the house for $120,000.What is her recognized gain or loss?

In a casualty or theft,the basis of property involved is reduced by the amount of insurance proceeds received and by any resulting recognized loss.

Ben sells stock (adjusted basis of $25,000)to his son,Ray,for its fair market value of $15,000.Ray gives the stock to his daughter,Trish,who subsequently sells it for $26,000.Ben's recognized loss is $0 and Trish's recognized gain is $1,000 ($26,000 - $15,000 - $10,000).

For nontaxable stock rights where the fair market value of the rights is 15% or more of the fair market value of the stock,the taxpayer is required to allocate a portion of the stock basis to the stock rights.

Ollie owns a personal use car for which he originally paid $48,000.He trades the car in on a sports utility vehicle (SUV)paying the automobile dealer cash of $30,000.If the negotiated price of the SUV is $49,000,what is Ollie's recognized gain or loss and his adjusted basis for the SUV?

Shontelle received a gift of income-producing property with an adjusted basis of $49,000 to the donor and fair market value of $35,000 on the date of gift.No gift tax was paid by the donor.Shontelle subsequently sold the property for $31,000.What is the recognized gain or loss?

Melody's adjusted basis for 10,000 shares of Cardinal,Inc.common stock is $1,000,000.During the year,she receives a 5% stock dividend that is a nontaxable stock dividend. a.What is the amount of Melody's gross income? b.What is Melody's total basis for the stock? c.What is Melody's basis per share?

If a seller assumes the buyer's liability on the property acquired,the buyer's adjusted basis for the property is increased by the amount of the liability assumed.

Neal and his wife Faye reside in Texas,a community property state.Their community property consists of real estate (adjusted basis of $800,000;fair market value of $6 million)and personal property (adjusted basis of $390,000;fair market value of $295,000).Neal dies first and leaves his estate to Faye.What is Faye's basis in the property after Neal's death?

Nat is a salesman for a real estate developer.His employer permits him to purchase a lot for $75,000.The employer's adjusted basis for the lot is $45,000,and its normal selling price is $90,000. What is Nat's recognized gain and his basis for the lot? Recognized       gain Basis a. \ 0 \ 75,000 b. \ 0 \ 90,000 c. \ 15,000 \ 75,000 d. \ 15,000 \ 90,000 e. \ 30,000 \ 105,000

If losses are disallowed in a related party transaction,the holding period for the buyer includes the holding period of the seller.

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

The carryover basis to a donee for property received by gift can be an amount greater than the donor's adjusted basis.

Monroe's delivery truck is damaged in an accident.Monroe's adjusted basis for the delivery truck prior to the accident is $20,000.If Monroe receives insurance proceeds of $21,000 and recognizes a casualty gain of $1,000,his adjusted basis for the delivery truck after the accident is $21,000.