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

Sandy and Greta form Tan,Inc.by transferring the following assets to the corporation in exchange for 1,000 shares of stock each. Sandy: Cash of $100,000 Greta: Land (worth $100,000;adjusted basis of $60,000). How much gain must Tan recognize on the receipt of these assets?

Seth and Cheryl,husband and wife,own property jointly.The property has an adjusted basis of $25,000 and a fair market value of $30,000.

Rose's manufacturing plant is destroyed by fire on the afternoon of November 1,2010.The adjusted basis is $800,000.The insurance company offers a settlement of $760,000.After protracted negotiations,Rose receives $810,000 on July 25,2011.Rose is a fiscal year taxpayer whose tax year ends on June 30th.What is the latest date that Rose can invest the proceeds in qualifying replacement property and elect to defer the gain under § 1033?

For the following exchanges,indicate which qualify as like-kind property.

Ashley sells investment land (adjusted basis of $145,000)that she has owned for 4 years to her husband,Richard,for its fair market value of $125,000.

Amanda uses a delivery van in her business.The adjusted basis is $21,000,and the fair market value is $18,000.The delivery van is stolen and Amanda receives insurance proceeds of $18,000.Determine Amanda's realized and recognized gain or loss.

Discuss the logic for mandatory deferral of realized gain or loss for a § 1031 like-kind exchange.

Ollie owns a personal use car for which he originally paid $42,000.He trades the car in on a sports utility vehicle (SUV)paying the automobile dealer cash of $24,000.If the negotiated price of the SUV is $45,000,what is Ollie's recognized gain or loss and his adjusted basis for the SUV?

Taxpayer acquired a personal residence ten years ago when he was 50 years old.During this period he has occupied the residence for only nine months (out of 12)each year due to winter vacations in Florida.Is taxpayer eligible for exclusion of gain under § 121?

Under what circumstances may a partial § 121 exclusion be available even though the taxpayer has used the § 121 exclusion within the two-year period preceding the sale of the current residence?

Hilary receives $10,000 for a 13-foot wide utility easement along one of the boundaries to her property.The easement provides that no structure can be built on that portion of the property.Her adjusted basis for the property is $200,000 and the easement covers 15% of the total acreage.Determine the effect of the $10,000 payment on Hilary's gross income and her basis for the property.

Felix gives 100 shares of stock to his daughter,Monica.The stock was acquired in 2001 for $20,000,and at the time of the gift,it had a fair market value of $60,000.Felix paid a gift tax of $6,000.

What kinds of property do not qualify under the like-kind provisions?

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

Tricia's office building,which has an adjusted basis of $220,000,is destroyed by fire on May 5,2010.Insurance proceeds of $425,000 are received on June 1,2010.She has a new office building constructed for $410,000,which she occupies on October 1,2011.Assuming Tricia's objective is to minimize the tax liability,calculate her recognized gain or loss and the basis of the new office building.

Discuss the application of holding period rules to property acquired by gift and inheritance.

Renee purchases taxable bonds with a face value of $200,000 for $212,000.The annual interest paid on the bonds is $10,000.Assume Renee elects to amortize the bond premium.The total premium amortization for the first year is $1,600.

If a taxpayer purchases a business and the price exceeds the fair market value of the listed assets,how is the excess allocated among the purchased assets?

On January 15 of the current taxable year,Merle sold stock with a cost of $40,000 to his brother Ned for $25,000,its fair market value.On June 21,Ned sold the stock to a friend for $26,000.

Discuss the treatment of realized gains from involuntary conversions.