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Exam 7: Property Transactions: Basis, Gain and Loss, and Nontaxable Exchanges

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Question 71

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Monica sells a parcel of land to her son, Elbert, for $90,000. Monica's adjusted basis is $100,000. Three years later, Elbert gives the land to his fiancée, Karen. At that date, the land is worth $104,000. No gift tax is paid. Since Elbert is going to be stationed in the U.S. Army in Germany for 3 years, they do not plan on being married until his tour is completed. Six months after receiving the land, Karen sells it for $110,000. At the same time, Karen sends Elbert a "Dear John" email. Calculate Karen's realized and recognized gain or loss.

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Elbert's adjusted basis for the land is ...

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Question 72

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Jamie bought her house in 2008 for $395,000. Since then, she has deducted $70,000 in depreciation associated with her home office and has spent $45,000 replacing all the old pipes and plumbing. She sells the house on July 1, 2016. Her realtor charged $34,700 in commissions. Prior to listing the house with the realtor, she spent $300 advertising in the local newspaper. Sammy buys the house for $500,000 in cash, assumes her mortgage of $194,000, and pays property taxes of $4,200 for the entire year on December 1, 2016. What is Jamie's adjusted basis at the date of the sale and the amount realized?

A) $370,000 adjusted basis; $661,400 amount realized.
B) $370,000 adjusted basis; $661,100 amount realized.
C) $370,000 adjusted basis; $665,200 amount realized.
D) $325,000 adjusted basis; $663,200 amount realized.
E) $325,000 adjusted basis; $694,000 amount realized.

F) D) and E)
G) None of the above

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Question 73

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Milton purchases land and a factory building for his business for $300,000 with $100,000 being allocated to the land. During the first year, Milton deducts cost recovery of $4,922. Milton's adjusted basis for the building at the end of the first year is $195,078 ($200,000 - $4,922).

Which of the following types of exchanges of insurance contracts qualify for nonrecognition treatment under § 1035?

Taylor inherited 100 acres of land on the death of his father in 2016. A Federal estate tax return was filed and this land was valued therein at $650,000, its fair market value at the date of the father's death. The father had originally acquired the land in 1970 for $112,000 and prior to his death he had expended $20,000 on permanent improvements. Determine Taylor's holding period for the land.

Mandy and Greta form Tan, Inc., by transferring the following assets to the corporation in exchange for 5,000 shares of stock each. Mandy: Cash of $450,000 Greta: Land (worth $450,000; adjusted basis of $90,000). How much gain must Tan recognize on the receipt of these assets?

In addition to other gifts, Megan made a gift of stock to Jeri in 1976. Megan had purchased the stock in 1974 for $7,500. At the time of the gift, the stock was worth $20,000. If Megan paid $850 of gift tax on the transaction in 1976, what is Jeri's gain basis for the stock?

Owen and Polly have been married for five years. Owen sells investment property to Polly for a realized gain of $140,000. Owen's gain of $140,000 is not recognized and Polly's basis for the property she purchased is her cost.

Define an involuntary conversion.

Lily exchanges a building she uses in her rental business for a building owned by Kendall, which she will use in her rental business. The adjusted basis of Lily's building is $120,000 and the fair market value is $170,000. Which of the following statements is correct?

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?

Melody's adjusted basis for 10,000 shares of Cardinal, Inc. common stock is $1,000,000. During the year, she receives a 5% stock dividend that is a nontaxable stock dividend. a.What is the amount of Melody's gross income? b.What is Melody's total basis for the stock? c.What is Melody's basis per share?

Karen purchased 100 shares of Gold Corporation stock for $11,500 on January 1, 2013. In the current tax year (2016) , she sells 25 shares of the 100 shares purchased on January 1, 2013, for $2,500. Twenty-five days earlier, she had purchased 30 shares for $3,000. What is Karen's recognized gain or loss on the sale of the stock, and what is her basis in the 30 shares purchased 25 days earlier?

If the fair market value of the property on the date of death is greater than on the alternate valuation date, the use of the alternate valuation amount is mandatory.

Which of the following statements is correct with respect to § 1044 (rollover of publicly traded securities gain into specialized small business investment companies) ?

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

Sam's office building with an adjusted basis of $750,000 and a fair market value of $900,000 is condemned on November 30, 2016. Sam is a calendar year taxpayer. He receives a condemnation award of $875,000 on March 1, 2017. He builds a new office building at a cost of $845,000 which is completed and paid for on December 31, 2019. What is Sam's recognized gain on receipt of the condemnation award and basis for the new office building assuming his objective is to minimize gain recognition?

In determining the basis of like-kind property received, postponed losses are:

Lola owns land as an investor. She exchanges the land for a warehouse which she leases to a tenant who uses it to store his business inventory. The exchange does qualify for like-kind exchange treatment.

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.