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Exam 7: Property Transactions: Basis, gain and Loss, and Nontaxable Exchange

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Question 1

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Sandra's automobile,which is used exclusively in her trade or business,was damaged in an accident.The adjusted basis prior to the accident was $11,000.The fair market value before the accident was $10,000 and the fair market value after the accident is $6,000.Insurance proceeds of $3,200 are received.What is Sandra's adjusted basis for the automobile after the casualty?

A) $0.
B) $7,000.
C) $7,800.
D) $10,200.
E) None of the above.

F) B) and C)
G) A) and B)

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Question 2

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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.

A) True
B) False

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Question 3

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The basis for gain and loss of personal use property converted to business use is the lower of the adjusted basis or the fair market value on the date of conversion.

Boyd acquired tax-exempt bonds for $430,000 in December 2013.The bonds,which mature in December 2018,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 2018.

The amount of the loss basis of a gift will differ from the amount of the gain basis only if at the date of the gift the adjusted basis of the property exceeds the property's fair market value.

If the alternate valuation date is elected by the executor in 2013,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.

A strip along the boundary of Joy's land is condemned for a utility easement.She receives a payment of $7,500 from the utility company.Her basis in the land is $80,000.Which of the following is correct?

Sammy exchanges equipment used in his business in a like-kind exchange.The property exchanged is as follows: The other party assumes the liability.

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

Ben sells stock (adjusted basis of $25,000)to his son,Ray,for its fair market value of $15,000.Ray gives the stock to his daughter,Trish,who subsequently sells it for $26,000.Ben's recognized loss is $0 and Trish's recognized gain is $1,000 ($26,000 - $15,000 - $10,000).

Over the past 20 years,Alfred has purchased 380 shares of Green,Inc.,common stock.His first purchase was in 1992 when he acquired 30 shares for $20 a share.In 1997,Alfred bought 150 shares at $10 a share.In 2012,Alfred acquired 200 shares at $50 a share.Alfred intends to sell 125 shares at $60 per share in the current year (2013) .If Alfred's objective is to minimize gain,what is his recognized gain?

An involuntary conversion results from the destruction (complete or partial),theft,seizure,requisition or condemnation,or the sale or exchange under threat or imminence of requisition or condemnation of the taxpayer's property.

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

The carryover basis to a donee for property received by gift can be an amount greater than the donor's adjusted basis.

Ramon sells land with an adjusted basis of $120,000 and a fair market value of $175,000 to Pauline,his wife,for $175,000.Discuss how the tax consequences would differ if Ramon and Pauline had never been married.

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?

Karen owns City of Richmond bonds with a face value of $10,000.She purchased the bonds on January 1,2013,for $11,000.The maturity date is December 31,2022.The annual interest rate is 8%.What is the amount of taxable interest income that Karen should report for 2013,and the adjusted basis for the bonds at the end of 2013,assuming straight-line amortization is appropriate?

Molly exchanges a small machine (adjusted basis of $85,000; fair market value of $78,000) used in her business and investment land (adjusted basis of $10,000; fair market value of $15,000) for a large machine (fair market value of $93,000) to be used in her business in a like-kind exchange.What is Molly's recognized gain or loss?

Reggie owns all the stock of Amethyst,Inc.(adjusted basis of $100,000).If he receives a distribution from Amethyst of $90,000 and corporate earnings and profits are $15,000,Reggie has a capital gain of $5,000 and an adjusted basis for his Amethyst stock of $0.

Kelly inherits land which had a basis to the decedent of $95,000 and a fair market value of $50,000 on August 4,2013,the date of the decedent's death.The executor distributes the land to Kelly on November 12,2013,at which time the fair market value is $49,000.The fair market value on February 4,2014,is $45,000.In filing the estate tax return,the executor elects the alternate valuation date.Kelly sells the land on June 10,2014,for $48,000.What is her recognized gain or loss?