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Exam 14: Property Transactions: Determination of Gain or Loss and Basis Considerations

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Question 1

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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.

A) True
B) False

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Question 2

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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 1,2011.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?

A) If Jane dies on June 1, 2012, Al's basis for the stock is $100,000.
B) If Jane dies on August 1, 2012, Al's basis for the stock is $900,000.
C) If Jane dies on June 15, 2012, Al's basis is $300,000.
D) If Jane dies on July 1, 2012, Al's basis is $100,000.
E) All of the above are true.

F) A) and D)
G) A) and B)

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Question 3

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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?

Under what circumstances will a distribution by a corporation to its only shareholder result in a capital gain?

Alicia buys a beach house for $425,000 which she uses as her personal vacation home.She builds an additional room on the house for $45,000.She sells the property for $510,000 and pays $30,000 in commissions and $4,000 in legal fees in connection with the sale.What is the recognized gain or loss on the sale of the house?

Rob was given a residence in 2012.At the time of the gift,the residence had a fair market value of $200,000,and its adjusted basis to the donor was $140,000.The donor paid a gift tax of $10,000 on the taxable gift of $187,000.What is Rob's basis for gain?

Reggie owns all the stock of Amethyst,Inc.(adjusted basis of $80,000).If he receives a distribution from Amethyst of $70,000 and corporate earnings and profits are $18,000,Reggie has a capital gain of $8,000 and an adjusted basis for his Amethyst stock of $0.

Iva owns Mauve,Inc.stock (adjusted basis of $40,000) which she sells to Joshua,her brother,for its fair market value of $32,000.Fifteen months later,he sells it to Faye,a friend,for its fair market value of $39,000.Determine Iva's recognized loss,Joshua's recognized gain or loss,and Faye's adjusted basis for the stock. Iva's recognized loss Joshua's recognized gain or loss Faye's basis

Marge purchases the Kentwood Krackers,a AAA level baseball team,for $1.5 million.The appraised values of the identified assets are as follows: The Krackers have won the pennant for the past two years.Determine Marge's adjusted basis for the assets of the Kentwood Krackers.

Khalid sells two personal use assets during the taxable year.A gain of $6,000 is realized on the sale of one asset and a loss of $2,000 is realized on the sale of the other asset.What is the recognized gain or loss?

Samantha gives her son,Steve,stock (basis of $72,000; fair market value of $68,000) and no gift tax results.When Steve subsequently sells the stock for $69,000,his recognized gain or loss is:

Steve purchased his home for $500,000.As a sole proprietor,he operates a certified public accounting practice in his home.For this business,he uses one room exclusively and regularly as a home office.In Year 1,$3,042 of depreciation expense on the home office was deducted on his income tax return.In Year 2,Steve sustained losses in his business; therefore,no depreciation was taken on the home office.Had he been allowed to deduct depreciation expense,his depreciation expense would have been $3,175.What is the adjusted basis in the home?

Carlton purchases land for $550,000.He incurs legal fees of $10,000 and broker's commission of $28,000 associated with the purchase.He subsequently incurs additional legal fees of $25,000 in having the land rezoned from agricultural to residential.He subdivides the land and installs streets and sewers at a cost of $800,000.What is Carlton's basis for the land and the improvements?

Noelle received dining room furniture as a gift from her friend,Jane.Jane's adjusted basis was $9,200 and the fair market value on the date of the gift was $7,000.Noelle decided she did not need the furniture and sold it to a neighbor six months later for $6,500.What is her recognized gain or loss?

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

Katie sells her personal use automobile for $15,000.She purchased the car four years ago for $31,000.What is Katie's recognized gain or loss?

Justin owns 1,000 shares of Oriole Corporation common stock (adjusted basis of $9,800).On April 27,2012,he sells 300 shares for $2,800,while on May 5,2012,he purchases 200 shares for $2,500.

Hubert purchases Fran's jewelry store for $950,000.The identifiable assets of the business are as follows: Hubert and Fran agree to assign $110,000 to a 7-year covenant not to compete.How should Hubert allocate the $950,000 purchase price to the assets?

This year,Fran receives a birthday gift of stock worth $75,000 from her aunt.The aunt has owned the stock (adjusted basis $50,000)for 10 years and pays gift tax of $27,000 on the transfer.Fran's basis in the stock is $75,000-the lesser of $77,000 ($50,000 + $27,000)or $75,000.

Since wash sales do not apply to gains,it may be desirable to engage in this type of transaction before the end of the tax year.