Exam 9: Acquisitions of Property

Determine the proper classification(s)of the asset discussed in the following scenario: Judge Ruiz purchased a new brass-trimmed gavel to use in her courtroom. I. Personal use property. $\quad$$\quad$$\quad$ IV. Intangible property. II. Business use property. $\quad$$\quad$$\quad$ V. Real estate. III. Tangible property. $\quad$$\quad$$\quad$$\quad$ VI. Personal property.

Match each statement with the correct term below. -Intangible property

Ludwig died on April 5,2013.As part of his will,he leaves land for which he paid $6,000 on December 31,2012,to his son Don.On April 5,2013,the land is worth $11,000.However,due to local real estate conditions,the land declines in value.On July 28 it is worth only $10,000; it declines further to $9,000 on October 5 and plunges to $7,000 on December 18. I.In the absence of any special elections,Don's basis in the land is $11,000. II.If the executor elects the alternate valuation date and distributes the land to Don on July 28,Don's basis in the land will be $9,000. III.If the executor elects the alternate valuation date and distributes the land to Don on December 18,Don's basis will be $7,000. IV.In the absence of any special elections,if the executor distributes the land to Don on October 5,Don's basis in the land will be $9,000.

Melonie purchased 100 shares of Wake Corporation stock for $6 per share on August 3,2011.On December 18,2012,Melonie sells all 100 shares for $4 per share.On January 5,2013,Melonie purchases 50 shares of Wake stock for $5 per share.What is the basis of the 50 shares Melonie holds on January 5,2013?

On June 10,2012,Wilhelm receives a gift of gold coins with a fair market value of $10,000.The gold coins had an adjusted basis of $12,000 to the donor.Wilhelm sells the gold coins August 1,2013,for $8,000.What is the amount of the recognized gain or loss on the sale?

Harold purchases land and a building by paying cash of $35,000,and assuming the seller's $82,000 mortgage.In addition,Harold pays $3,000 of legal fees related to the purchase.For property tax purposes,the land is valued at $17,000 and the building at $34,000.Harold's basis in the building is

Match each statement with the correct term below. -Split basis

Taxpayers who construct property for their own use must capitalize both the direct and indirect construction costs.

Determine the proper classification(s)of a house owned and used by Rhonda as her insurance agency office. I. Personal use property. $\quad$$\quad$$\quad$ IV. Intangible property. II. Business use property. $\quad$$\quad$$\quad$ V. Real estate. III. Tangible property. $\quad$$\quad$$\quad$$\quad$ VI. Personal property.

Determine the proper classification(s)of the asset discussed in the following scenario: "Cher receives a copyright for a new song she has written" I. Personal use property. $\quad$$\quad$$\quad$ IV. Intangible property. II. Business use property. $\quad$$\quad$$\quad$ V. Real estate. III. Tangible property. $\quad$$\quad$$\quad$$\quad$ VI. Personal property.

Indicate the classification of each of the following assets as personal property,real property,intangible property,personal use property or business use property. a.A dentist purchases a sofa for the waiting room at his dental office. b.A dentist purchases a sofa for his living room at home. c.A dentist has a landscape architect plant shrubbery and trees around his office building. d.A dentist pays a landscaper to grade his land and install fencing for a baseball practice field for his son. e.A dentist obtains a patent for a procedure he developed.

Tien purchases an office building for $400,000,paying a $75,000 cash down payment and borrowing $325,000 from Atlantic Meridian Mortgage Co.The purchase price is properly allocated 90% to the building and 10% to the land.Two years after the purchase,Tien remodeled one floor of the building at a cost of $25,000.Annual maintenance costs and property taxes total $4,000.A total depreciation of $36,000 is deducted over the 3 years.Determine the adjusted basis of the building and the land as of the end of year 3:

Match each statement with the correct term below. -Mixed-use property

The split basis rule for determining the basis of gifts allows for the transfer of unrealized losses from one taxpayer to another for calculation of gains.

Whenever the donor's adjusted basis is used to compute a gain or loss on the donee's disposition of property received by gift,the donee's holding period is always the period of time the property was owned by the donee only.

Match each statement with the correct term below. -Real property

Match each statement with the correct term below. -Personalty

On February 3 of the current year,Samantha converts her house to a rental property.Samantha's adjusted basis in the house is $150,000 and the fair market value is $120,000 on the date of conversion.Samantha uses the rental for 3 years and properly deducts depreciation totaling $12,000.Then,she sells the house for $130,000.What is the amount of the gain or (loss)recognized on the sale?

Diane receives a gift of stock from Sue on July 2,2013,when the stock was trading for $20,000.Sue paid $4,000 for the stock several years ago.Sue pays a gift tax of $500 on the transfer.Diane's basis in the stock is:

Tony receives an automobile from his uncle,Ned,as a graduation gift.Ned used the vehicle only for commuting to his office during the 3 years he owned it.Ned paid $20,000 for the vehicle.It is valued at $8,000 on the date of the gift.Tony will use the automobile 100% of the time for his business.Determine Tony's basis in the automobile for depreciation purposes.Explain your answer in terms of the concepts of taxation.