Question 1

Patty's factory building,which has an adjusted basis of $475,000,is destroyed by fire on April 8,2013.Insurance proceeds of $500,000 are received on June 1,2013.She has a new factory building constructed for $490,000,which she occupies on October 1,2013.Assuming Patty's objective is to minimize the tax liability,calculate her recognized gain or loss and the basis of the new factory building.

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Question 2

a. Orange Corporation exchanges a warehouse located in Michigan (adjusted basis of $560,000)for a warehouse located in Ohio (adjusted basis of $450,000; fair market value of $525,000).Indicate the amount of gain or loss that is recognized by Orange Corporation on the exchange,and the basis of the warehouse acquired.

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Question 3

Elbert gives stock worth $28,000 (no gift tax resulted)to his friend,Jeff,on June 8,2013.Elbert purchased the stock on September 1,2006,and his adjusted basis is $22,000.Jeff dies on December 8,2014,and bequeaths the stock to Elbert.At that date,the fair market value of the stock is $31,000.
 a. What is Jeff s basis and holding period for the stock?
b. What is Elbert's basis and holding period for the stock?

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Question 4

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

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Question 5

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

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Question 6

What is the general formula for calculating the adjusted basis of property?

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Question 7

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

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Question 8

Mitch owns 1,000 shares of Oriole Corporation common stock (adjusted basis of $15,000).On April 27,2013,he sells 400 shares for $5,200,while on May 5,2013,he purchases 200 shares for $3,600.

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Question 9

On January 15 of the current taxable year,Merle sold stock with a cost of $40,000 to his brother Ned for $25,000,its fair market value.On June 21,Ned sold the stock to a friend for $26,000.
 a. What are the tax consequences to Merle and Ned?
b. Would Ned recognize any gain if he sold the stock for $ \$ 41,000 $ ?

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Question 10

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?

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Question 11

Define fair market value as it relates to property transactions.

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Question 12

Beth sells investment land (adjusted basis of $225,000)that she has owned for 6 years to her husband,Richard,for its fair market value of $195,000.

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Question 13

Jake exchanges an airplane used in his business for a smaller airplane to be used in his business.His adjusted basis for the airplane is $325,000 and the fair market value is $310,000.The fair market value of the smaller airplane is $300,000.In addition,Jake receives cash of $10,000.

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Question 14

After 5 years of marriage,Dave and Janet decided to get a divorce.As part of the divorce settlement,Janet transfers to Dave the house she purchased prior to their marriage.Janet's adjusted basis for the house is $230,000 and the fair market value is $410,000 on the date of the transfer.What are the tax consequences to Janet and to Dave as a result of the transfer?

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Question 15

Eunice Jean exchanges land held for investment located in Rolla,Missouri,for land to be held for investment located near Madrid,Spain.Her basis for the land given up is $450,000 and the fair market value of the land received is $500,000.Eunice Jean also receives cash of $45,000.
 $\text { a. What is Eunice Jean's secognized gain? }$
$\text { b. What is her basis for the land received? }$

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Question 16

What is the difference between the depreciation (or cost recovery)allowed and the depreciation (or cost recovery)allowable and what effect does each have on the adjusted basis of property?

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Question 17

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.

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Question 18

For each of the following involuntary conversions,determine if the property qualifies as replacement property.

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Question 19

For the following exchanges,indicate which qualify as like-kind property.

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Question 20

Evelyn's office building is destroyed by fire on July 12,2013.The adjusted basis is $315,000.She receives insurance proceeds of $350,000 on August 31,2013.Calculate the amount that Evelyn must reinvest in qualifying property in order that her recognized gain be $20,000.Assume she elects § 1033 (nonrecognition of gain from an involuntary conversion)postponement treatment.

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