Exam 9: Acquisitions of Property

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.

Brad, an engineering consultant, was given stock valued at $3,000 for services rendered. His basis in the stock he received for the services is zero since he received no cash.

Determine the year-end adjusted basis of Roberto's 1/2 interest in the Halifax Partnership. At the beginning of the year, Roberto's adjusted basis is $80,000. The net operating profit of the partnership is $90,000. Also, Halifax distributes $15,000 of cash to Roberto.

Perry inherits stock from his Aunt Margaret that had a basis of $40,000 to Margaret and a fair market value of $54,000 on May 20, 2018, the date of her death. Paul sells the stock on June 21, 2018 for $65,000. What is the amount and character of the gain or loss on the sale?

The split basis rule for determining the basis of gifts allows for one basis for determining losses and another for calculation of gains.

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

Sanford gives Mitchell 100 shares of stock that cost Sanford $5,000 several years ago. On the date of the gift, the stock is valued at $3,000. Mitchell holds the stock until the value increases and sells it for $4,000. What is Mitchell's recognized gain or loss on the sale?

The split basis rules for business property prevent the deduction of the disallowed personal loss through depreciation or a loss from the sale of business property.

Personal property consists of any property that is held by an individual.

Sarah gave her granddaughter, Alice, some Eli Lilly Co. stock last year when its fair market value was $25,000. Gift taxes of $4,000 were paid on this transfer. Sarah acquired the stock in 2004 at a cost of $35,000. Alice sold the Eli Lilly stock this year for $32,000. What amount of gain (loss) will Alice recognize from her sale of the stock?

Kobe receives a gift of rare books valued at $10,000. The books have an adjusted basis of $6,000 to the donor. Several months later, Kobe sells the books to a professional collector for $7,000. What is Kobe' gain or (loss) on the sale?

Kevin buys one share of Mink, Inc., common stock for $100. On February 3 of the current year, the corporation makes a nontaxable distribution of one share of preferred stock to all holders of record of common stock. On the distribution date, the common stock is trading at $250 and the preferred stock is trading at $50. After the distribution, Kevin's bases in the two shares of stock are: ​ Common Preferred

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

Jose is exploring his options to minimize his tax liability for this year. Earlier in the year Jose sold a substantial number of his securities and recognized a $15,000 gain. He would like to mitigate the tax effects of that gain. The remainder of Jose's portfolio consists of 1,000 shares of Garfield Corporation stock. Jose has not sold it because it has a history of paying large dividends. Jose paid $20,000 for the stock, but it is currently trading for $5 per share. Jose is considering selling all of his Garfield stock, realizing the loss, netting it against his capital gains, and then repurchasing 1,000 shares a few days later. He knows he will lose some money due to transaction and brokerage costs, but he feels it may be worth it. Discuss Jose's plan. Relate your analysis to the basic tax concepts that help drive your position.

Sonya inherits 1,000 shares of Big Red Airline Corporation stock from the estate of her Uncle Tony. Tony died on August 4, 2018. The stock's value on August 4, 2018, is $2,000. Tony purchased the stock for $3,000 several years ago. Sonya sells the 1,000 shares for $2,300 on December 8, 2018. What is Sonya's holding period of the stock?

Melonie purchased 100 shares of Wake Corporation stock for $6 per share on August 3, 2016. On December 18, 2017, Melonie sells all 100 shares for $4 per share. On January 5, 2018, Melonie purchases 50 shares of Wake stock for $5 per share. What is the basis of the 50 shares Melonie holds on January 5, 2018?

Ted purchases some forest land in 2016 with the intention of building a log cabin to use as a vacation home. To obtain the land, Ted pays $10,000 cash, assumes the seller's $19,000 mortgage on the land and pays $3,000 in commissions and legal fees related to the purchase. In 2017, Ted pays a contractor $4,000 to bulldoze and level the site of the log cabin. In 2018, Ted has a well dug and water and sewer lines laid in the ground at a cost of $6,000. Ted paid $2,000 of property taxes in 2016 and $5,000 of property taxes in 2017 and 2018 on the land. What is Ted's basis in the land at the end of 2018?

Randall is given five acres of land in 2005. At the time of the gift, the land had a fair market value of $182,000, and its adjusted basis to the donor was $160,000. What is Randall's gain if he sells the land for $184,000?

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

Determine the proper classification(s) of a house owned and used by John as his principal residence. I.Personal use property. IV.Intangible property. II.Business use property. V.Real estate. III.Tangible property. VI.Personal property. ​