Question 1

How is the donee's basis calculated for the gift of appreciated property for a gift made before 1977? Assume the donor pays gift tax.

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Question 2

Lois received nontaxable stock rights with a fair market value of $6,000.The fair market value of the stock on which the rights were received is $24,000 (cost $14,000).Assume the rights are exercised by paying $32,000 plus the rights.Discuss how to calculate the basis of the old stock and the basis of the new stock.

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Question 3

Sam and Cheryl,husband and wife,own property jointly.The property has an adjusted basis of $400,000 and a fair market value of $500,000.
a.Discuss the rules for the calculation of the adjusted basis of the property to Sam if he inherits his wife's share of the property and Sam and Cheryl live in a community property state.
b.If they live in a common law state?

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Question 4

Joseph converts a building (adjusted basis of $50,000 and fair market value of $40,000)from personal use to business use.Justin receives a building with a $40,000 fair market value ($50,000 donor's adjusted basis)from his mother as a gift.Discuss the tax consequences with respect to Joseph's and Justin's adjusted basis.

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Question 5

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

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Question 6

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

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Question 7

What effect does a deductible casualty loss have on the adjusted basis of property?

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Question 8

What is the easiest way for a taxpayer who is going to sell property that has declined in value to avoid the § 267 loss disallowance provision?

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Question 9

Jamie is terminally ill and does not expect to live much longer.Pondering the consequences of her estate,she decides how to allocate her property to her nephews.She makes a gift of depreciated property (i.e. ,adjusted basis exceeds fair market value)to Will,a gift of appreciated property (i.e. ,fair market value exceeds adjusted basis)to Jim,and leaves appreciated property to Sam in her will.Each of the properties has the same fair market value.From an income tax perspective,which nephew is her favorite?

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Question 10

Define a bargain purchase of property and discuss the related tax consequences.

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Question 11

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?

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Question 12

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?

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Question 13

Morgan owned a convertible that he had purchased two years ago for $46,000 and which he transfers to his sole proprietorship.How is the sole proprietorship's basis for the car calculated? What additional information does Morgan need?

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Question 14

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 15

Tara owns common stock in Taupe,Inc. ,with an adjusted basis of $250,000.She receives a preferred stock dividend which is nontaxable.
a.What effect does the preferred stock dividend have on Tara's adjusted basis of the common stock?
b.How is the basis of the preferred stock calculated?
c.What effect does the preferred stock dividend have on Tara's gross income?

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Question 16

Discuss the application of holding period rules to property acquired by gift and inheritance.

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Question 17

For a corporate distribution of cash or other property to a shareholder,when does dividend income or a return of capital result?

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Question 18

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

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Question 19

Maurice sells his personal use automobile at a realized loss.Under what circumstances can Maurice deduct the loss? What if the personal use asset was sold at a realized gain?

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Question 20

If a taxpayer purchases taxable bonds at a premium,the amortization of the premium is elective.However,if a taxpayer purchases tax-exempt bonds at a premium,the amortization of the premium is mandatory.Explain this difference in the treatment.

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