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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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In 1973,Fran received a birthday gift of stock worth $75,000 from her aunt.The aunt had owned the stock (adjusted basis $50,000)for 10 years and paid 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.

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For disallowed losses on related-party transactions,who has the right of offset?

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The right of offset is available only to...

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Question 3

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Mary sells her personal use automobile for $20,000.She purchased the car two years ago for $17,000.What is Mary's recognized gain or loss? It increased in value due to its excellent mileage,yet safe design.

Jan purchases taxable bonds with a face value of $250,000 for $265,000.The annual interest paid on the bonds is $10,000.Assume Jan elects to amortize the bond premium.The total premium amortization for the first year is $1,600. a.What is Jan's interest income for the first year? b.What is Jan's interest deduction for the first year? c.What is Jan's adjusted basis for the bonds at the end of the first year?

Boyd acquired tax-exempt bonds for $430,000 in December 2014.The bonds,which mature in December 2019,have a maturity value of $400,000.Boyd does not make any elections regarding the amortization of the bond premium.Determine the tax consequences to Boyd when he redeems the bonds in December 2019.

Mitch owns 1,000 shares of Oriole Corporation common stock (adjusted basis of $15,000).On April 27,2014,he sells 400 shares for $5,200,while on May 5,2014,he purchases 200 shares for $3,600. a.What is Mitch's recognized gain or loss resulting from these transactions? a.and b.What is Mitch's basis for the stock acquired on May 5,2014? b.if he had sold the 400 shares on December 27,2014,and purchased the 200 shares on January 5,2015? c.Could Mitch have obtained different tax consequences in

Yolanda buys a house in the mountains for $450,000 which she uses as her personal vacation home.She builds an additional room on the house for $40,000.She sells the property for $560,000 and pays $28,000 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?

Nigel purchased a blending machine for $125,000 for use in his business.As to the machine,he has deducted MACRS cost recovery of $31,024,maintenance costs of $5,200,and repair costs of $4,000.Calculate Nigel's adjusted basis for the machine.

Gene purchased an SUV for $45,000 which he uses 100% for personal purposes.When the SUV is worth $30,000,he contributes it to his business.The gain basis is $45,000,the loss basis is $30,000,and the basis for cost recovery is $45,000.

The basis of inherited property usually is its fair market value on the date of the decedent's death.

Marsha transfers her personal use automobile to her business (a sole proprietorship).The car's adjusted basis is $30,000 and the fair market value is $16,000.No cost recovery had been deducted by Marsha,since she held the car for personal use.Determine the adjusted basis of the car to Marsha's sole proprietorship including the basis for cost recovery.

78. Mike’s basis in his stock in Tan Corporation is $75,000. He receives nontaxable stock rights (fair market value of $20,000) when the value of the stock is $100,000. What is the basis for the stock rights?

Which of the following statements is false?

Abby sells real property for $300,000.The buyer pays $5,000 in property taxes that had accrued during the year while the property was still legally owned by Abby.In addition,Abby pays $15,000 in commissions and $3,000 in legal fees in connection with the sale.How much does Abby realize (the amount realized) from the sale of her property?

If the alternate valuation date is elected by the executor in 2014,the total basis of inherited property will be more than what it would have been if the primary valuation date and amount had been used.

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?

64. Elvis owns all of the stock of White Corporation. The accumulated earnings and profits of White Corporation at the beginning of the year are a deficit of $20,000. The current earnings and profits are $30,000. Elvis’ basis for his stock is $250,000. He receives a distribution of $300,000 on the last day of the tax year. How much dividend income and/or capital gain should Elvis report?

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.

Tariq sold certain U.S.Government bonds and State of Oregon bonds at a loss to offset short-term capital gain from a previous transaction.He felt that the U.S.Government and State of Oregon bonds were "good" investments,so he repurchased identical securities within one week.Do these transactions constitute wash sales? If the bond sales resulted in the recognition of gain (rather than loss),would the wash sale provisions prevent the gains from being recognized?

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