Question 1

Discuss the treatment of losses from involuntary conversions.

Accepted Answer

Business losses are § 1231 losses,personal casualty and theft losses are itemized deductions,and personal condemnation losses are not recognized.

Question 2

Define qualified small business stock under § 1045.

Accepted Answer

Qualified small business stock is stock of a qualified small business that is acquired by the taxpayer at its original issue in exchange for money or other property (excluding stock)or as compensation for services.A qualified small business is a domestic corporation that satisfies the following requirements:

Question 3

Explain how the sale of investment property at a loss to a brother is treated differently from a sale to a nephew.

Accepted Answer

The brother is a related party under the § 267 loss disallowance provision.Consequently,the realized loss on the sale of the investment property is disallowed.The brother's basis for the investment property is its cost.However,if the brother sells the investment property at a realized gain,he can offset this gain with as much of the prior disallowed loss as is needed to reduce it to zero.Otherwise,the disallowed loss is wasted.
Because a nephew is not treated as a related party under § 267,the realized loss on the sale of the investment property is recognized.The nephew's basis for the investment property is its cost.

Question 4

Why is it generally undesirable to pass property by death when its fair market value is less than basis?

Accepted Answer

Assuming the property is not p

Question 5

Misty owns stock in Violet,Inc. ,for which her adjusted basis is $75,000.She receives a cash distribution of $52,000 from Violet.

Accepted Answer

The answer of Misty owns stock in Violet,Inc. ,for which...

Question 6

Annette purchased stock on March 1,2010,for $32,000.At December 31,2010,it was worth $29,000.She also purchased a bond on September 1,2010,for $9,000.At year end,it was worth $12,000.Determine Annette's realized and recognized gain or loss.

Accepted Answer

Annette's realized gain or los

Question 7

Under what circumstance is there recognition of some or all of the realized gain associated with the giving of boot by the taxpayer in a like-kind exchange?

Accepted Answer

Generally,the giving of boot by the taxp

Question 8

What effect do the assumption of liabilities have on a § 1031 like-kind exchange?

Accepted Answer

For the taxpayer who is transferring the

Question 9

Ed and Cheryl have been married for 27 years.They own land jointly with a basis of $140,000.Ed dies in 2010,when the fair market value of the land is $220,000.Under the joint ownership arrangement,the land passed to Cheryl.

Accepted Answer

The answer of Ed and Cheryl have been married for...

Question 10

Inez's adjusted basis for 6,000 shares of Cardinal,Inc.common stock is $600,000.During the year,she receives a 5% stock dividend.

Accepted Answer

The answer of Inez's adjusted basis for 6,000 shares of...

Question 11

Discuss the effect of a liability assumption on the seller's amount realized and the buyer's adjusted basis.

Accepted Answer

If the buyer assumes the seller's liabil

Question 12

Albert,age 57,leased a house for one year in Denver with an option to buy as his personal residence.At the end of the lease,he purchased the house.He lived there for an additional 25 months before his employer transferred him to Tucson.Expecting to be in Tucson for 18 to 24 months,he rented the Denver house for 18 months with an option to extend on a month to month basis for an additional 6 months.At the end of the 18-month period,Albert's employer offered him a permanent position in Tucson as branch manager.The tenant who had been occupying Albert's house in Denver purchased it at the end of the 24-month extended lease period.Is Albert eligible to elect exclusion treatment under § 121?

Accepted Answer

Yes.To qualify for § 121 exclusion treat

Question 13

Don,who is single,sells his personal residence on October 5,2010,for $380,000.His adjusted basis was $102,000.He pays realtor's commissions of $18,000.He owned and occupied the residence for 14 years.Having decided that he no longer wants the burdens of home ownership,he invests the sales proceeds in a mutual fund and enters into a 1-year lease on an apartment.The detriments of renting,including a crying child next door,cause Don to rethink his decision.Therefore,he purchases another residence on November 6,2011,for $188,000.Is Don eligible for exclusion of gain treatment under § 121 (exclusion of gain on sale of principal residence)? Calculate Don's recognized gain and his basis for the new residence.

Accepted Answer

Don is eligible for § 121 exclusion trea

Question 14

What is the general formula for calculating the amount realized on the sale or other disposition of property?

Accepted Answer

Money received
+ Fair market v

Question 15

For gifts made after 1976,when will part of the gift tax paid by the donor be added to the donee's basis?

Accepted Answer

This result would occur if the fair mark

Question 16

Evelyn's office building is destroyed by fire on July 12,2010.The adjusted basis is $272,000.She receives insurance proceeds of $300,000 on August 31,2010.Calculate the amount that Evelyn must reinvest in qualifying property in order that her recognized gain be $15,000.Assume she elects § 1033 (nonrecognition of gain from an involuntary conversion)postponement treatment.

Accepted Answer

The answer of Evelyn's office building is destroyed by fire...

Question 17

a.Orange Corporation exchanges a warehouse located in New York (adjusted basis of $300,000)for a warehouse located in New Jersey (adjusted basis of $350,000;fair market value of $250,000).Indicate the amount of gain or loss that is recognized by Orange Corporation on the exchange,and the basis of the warehouse acquired.

Accepted Answer

The answer of a.Orange Corporation exchanges a warehouse located in...

Question 18

Samuel's hotel is condemned by the City Housing Authority on July 5,2010,for which he is paid condemnation proceeds of $950,000.He first received official notification of the pending condemnation on May 2,2010.Samuel's adjusted basis for the hotel is $600,000 and he uses a fiscal year for tax purposes with a September 30 tax year-end.

Accepted Answer

The answer of Samuel's hotel is condemned by the City...

Question 19

On January 5,2010,Bill sells his principal residence with an adjusted basis of $185,000 for $500,000.He has owned and occupied the residence for 18 years.He pays $30,000 in commissions and $1,200 in legal fees in connection with the sale.One month before the sale,Bill painted the house at a cost of $4,000 and repaired various items at a cost of $2,500.On October 15,2010,Bill purchases a new home for $400,000.On November 15,2011,he pays $25,000 for completion of a new room on the house,and on January 14,2012,he pays $15,000 for the construction of a pool.What is the Bill's recognized gain on the sale of his old principal residence and what is the basis for the new residence?

Accepted Answer

@#IMG-DLM& The $4,000 for painting and $2,500 for

Question 20

Louis sold his farm during the current taxable year.At the date of the sale,the farm had an adjusted basis of $212,000 and was encumbered by a mortgage of $190,000.The buyer paid him $110,000 in cash,agreed to take the title subject to the $190,000 mortgage,and agreed to pay him $80,000 with interest at 9 percent one year from the date of sale.How much is Louis' recognized gain on the sale?

Accepted Answer

The answer of Louis sold his farm during the current...

Exam 13: Part 2--Property Transactions: Determination of Gain or Loss,basis Considerations,and Nontaxable Exchanges

Discuss the treatment of losses from involuntary conversions.

Define qualified small business stock under § 1045.

Explain how the sale of investment property at a loss to a brother is treated differently from a sale to a nephew.

Why is it generally undesirable to pass property by death when its fair market value is less than basis?

Misty owns stock in Violet,Inc. ,for which her adjusted basis is $75,000.She receives a cash distribution of $52,000 from Violet.

Annette purchased stock on March 1,2010,for $32,000.At December 31,2010,it was worth $29,000.She also purchased a bond on September 1,2010,for $9,000.At year end,it was worth $12,000.Determine Annette's realized and recognized gain or loss.

Under what circumstance is there recognition of some or all of the realized gain associated with the giving of boot by the taxpayer in a like-kind exchange?

What effect do the assumption of liabilities have on a § 1031 like-kind exchange?

Ed and Cheryl have been married for 27 years.They own land jointly with a basis of $140,000.Ed dies in 2010,when the fair market value of the land is $220,000.Under the joint ownership arrangement,the land passed to Cheryl.

Inez's adjusted basis for 6,000 shares of Cardinal,Inc.common stock is $600,000.During the year,she receives a 5% stock dividend.

Discuss the effect of a liability assumption on the seller's amount realized and the buyer's adjusted basis.

What is the general formula for calculating the amount realized on the sale or other disposition of property?

For gifts made after 1976,when will part of the gift tax paid by the donor be added to the donee's basis?

An Introduction to Taxation and Understanding the Federal Tax Law

Working With the Tax Law

Computing the Tax

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation,cost Recovery,amortization,and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payments

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

Property Transactions: Capital Gains and Losses,1231,and Recapure Provisions

Alternative Minimum Tax

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Distributions in Complete Liquidation and an Overview of Reorganizations

Partnerships

S Corporations

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Income Taxation of Trusts and Estates

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