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

In 2006,Harold purchased a classic car that he planned to restore for $12,000.However,Harold is too busy to work on the car and he gives it to his daughter Julia in 2010.At this time,the fair market value of the car has declined to $10,000.Harold paid no gift tax on the transaction.Julia completes some of the restoration herself with out-of-pocket costs of $5,000.She later sells the car for $30,000.What is Julia's recognized gain or loss on the sale of the car?

If the alternate valuation date is elected by the executor of the estate,the basis of all of the property included in the decedent's estate becomes the fair market value 6 months after the decedent's death.

During 2010,Zeke and Alice,a married couple,decided to sell their residence,which had a basis of $200,000.They had owned and occupied the residence for 20 years.To make it more attractive to prospective buyers,they had the inside painted in April at a cost of $5,000 and paid for the work immediately.They sold the house in May for $800,000.Broker's commissions and other selling expenses amounted to $50,000.They purchased a new residence in July for $400,000.What is the recognized gain and the adjusted basis of the new residence?

In order to qualify for like-kind exchange treatment under § 1031,which of the following requirements must be satisfied?

Brett owns investment land located in Tucson,Arizona.He exchanges it for other investment land.In which of the following locations may the other investment land be located and enable Brett to qualify for § 1031 like-kind exchange treatment?

Kevin purchased 5,000 shares of Purple Corporation stock at $10 per share.Two years later,he receives a 5% common stock dividend.At that time,the common stock of Purple Corporation had a fair market value of $12.50 per share.What is the basis of the Purple Corporation stock,the per share basis,and gain recognized upon receipt of the common stock dividend?

Which of the following statements is correct?

A related party purchaser includes in the basis of the property acquired the seller's disallowed loss.

Sandra's automobile,which is used exclusively in her trade or business,was damaged in an accident.The adjusted basis prior to the accident was $11,000.The fair market value before the accident was $10,000 and the fair market value after the accident is $6,000.Insurance proceeds of $3,200 are received.What is Sandra's adjusted basis for the automobile after the casualty?

One of the justifications for nontaxable exchange treatment is that the taxpayer lacks the wherewithal to pay.

Livestock of different sexes cannot qualify for like-kind exchange treatment even if the livestock has been held for over one year.

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?

Al owns stock with an adjusted basis of $100,000 and a fair market value of $300,000.He gives the stock to Jane on July 1,2009.When Jane dies,the fair market value of the stock is $900,000.Jane's will provides that Al is to receive the stock.Which of the following is false?

The amount of a corporate distribution qualifying for capital recovery treatment which exceeds the recipient's stock basis is treated as an ordinary gain.

If personal use property is converted to business use:

A taxpayer whose principal residence is destroyed in a fire can use both the § 121 (sale of residence gain exclusion)and the § 1033 (involuntary conversion postponement of gain)provisions.

Mona purchased a business from Judah for $1,000,000.Judah's records and an appraiser provided her with the following information regarding the assets purchased: What is Mona's adjusted basis for the land,building,and equipment?

Stocks and bonds held for investment purposes qualify under the like-kind exchange provision.

Gabe's office building (adjusted basis of $200,000;fair market value of $250,000)is destroyed by a hurricane.Due to a 30% co-insurance clause,Gabe receives insurance proceeds of only $175,000.If Gabe purchases an office building for $250,000 one month later,its adjusted basis is $275,000 ($250,000 cost + $25,000 postponed loss).

Robert and Diane,husband and wife,live in Pennsylvania,a common law state.They purchased land as joint tenants in 2006 for $60,000.In 2010,Diane dies and bequeaths her share of the land to Robert.The land has a fair market value of $88,000.What is Robert's adjusted basis for the land?