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

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Question 31

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Mitch owns 1,000 shares of Oriole Corporation common stock (adjusted basis of $15,000). On April 27, 2017, he sells 400 shares for $5,200, while on May 5, 2017, 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, 2017? b. if he had sold the 400 shares on December 27, 2017, and purchased the 200 shares on January 5, 2018? c.Could Mitch have obtained different tax consequences in

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Question 32

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Katie sells her personal use automobile for $12,000. She purchased the car three years ago for $25,000. What is Katie's recognized gain or loss?

A) $0
B) $12,000
C) ($13,000)
D) ($25,000)
E) None of the above

F) A) and E)
G) All of the above

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Question 33

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Paul sells property with an adjusted basis of $45,000 to his daughter Dean, for $38,000. Dean subsequently sells the property to her brother, Preston, for $38,000. Three years later, Preston sells the property to Hun, an unrelated party, for $50,000. What is Preston's recognized gain or loss on the sale of the property to Hun?

When a property transaction occurs, what four questions should be considered with respect to the sale or other disposition?

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?

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?

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?

Over the past 20 years, Alfred has purchased 380 shares of Green, Inc., common stock. His first purchase was in 1994 when he acquired 30 shares for $20 a share. In 2001, Alfred bought 150 shares at $10 a share. In 2016, Alfred acquired 200 shares at $50 a share. Alfred intends to sell 125 shares at $60 per share in the current year (2017) . If Alfred's objective is to minimize gain and assuming he can adequately identify the shares to be sold, what is his recognized gain?

If property that has been converted from personal use to business use has appreciated in value, its basis for gain will be the same as the basis for loss.

The holding period for property acquired by gift is automatically long term.

Nontaxable stock dividends result in:

Andrew acquires 2,000 shares of Eagle Corporation stock for $100,000 on March 31, 2013. On January 1, 2017, he sells 125 shares for $5,000. On January 22, 2017, he purchases 135 shares of Eagle Corporation stock for $6,075. When does Andrew's holding period begin for the 135 shares?

Lynn purchases a house for $52,000. She converts the property to rental property when the fair market value is $115,000. After deducting depreciation (cost recovery) expense of $1,130, she sells the house for $120,000. What is her recognized gain or loss?

Joyce's office building was destroyed in a fire (adjusted basis of $350,000; fair market value of $400,000) . Of the insurance proceeds of $360,000 she receives, Joyce uses $310,000 to purchase additional inventory and invests the remaining $50,000 in short-term certificates of deposit. She received only $360,000 because of a co-insurance clause in her insurance policy. What is Joyce's recognized gain or loss?

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).

For nontaxable stock rights where the fair market value of the rights is 15% or more of the fair market value of the stock, the taxpayer is required to allocate a portion of the stock basis to the stock rights.

Why is it generally undesirable to pass property by death when its fair market value is less than basis?

Karen owns City of Richmond bonds with a face value of $10,000. She purchased the bonds on January 1, 2017, for $11,000. The maturity date is December 31, 2026. The annual interest rate is 4%. What is the amount of taxable interest income that Karen should report for 2017, and the adjusted basis for the bonds at the end of 2017, assuming straight-line amortization is appropriate?

Peggy uses a delivery van in her business. The adjusted basis is $39,000, and the fair market value is $34,000. The delivery van is stolen and Peggy receives insurance proceeds of $34,000. Determine Peggy's realized and recognized gain or loss.

Omar has the following stock transactions during 2017: ​ a.What is Omar's recognized gain or loss on the stock sales if his objective is to minimize the recognized gain and to maximize the recognized loss? b.What is Omar's recognized gain or loss if he does not identify the shares sold? ​