Question 1

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 2

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

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Question 3

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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Question 4

Describe the relationship between the recovery of capital doctrine and the realized and recognized gain and loss concepts.

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Question 5

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 6

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 7

Define fair market value as it relates to property transactions.

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Question 8

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

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Question 9

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

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Question 10

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.

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Question 11

Justin owns 1,000 shares of Oriole Corporation common stock (adjusted basis of $9,800).On April 27,2012,he sells 300 shares for $2,800,while on May 5,2012,he purchases 200 shares for $2,500.

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Question 12

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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Question 13

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 14

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

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Question 15

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

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Question 16

Lois received nontaxable stock rights with a fair market value of $4,000.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 $31,000 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 17

Lynn transfers her personal use automobile to her business (a sole proprietorship).The car's adjusted basis is $35,000 and the fair market value is $12,000.No cost recovery had been deducted by Lynn,since she held the car for personal use.Determine the adjusted basis of the car to Lynn's sole proprietorship including the basis for cost recovery.

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Question 18

Ed and Cheryl have been married for 27 years.They own land jointly with a basis of $300,000.Ed dies in 2012,when the fair market value of the land is $500,000.Under the joint ownership arrangement,the land passed to Cheryl.

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Question 19

Taylor owns common stock in Taupe,Inc.,with an adjusted basis of $100,000.She receives a preferred stock dividend which is nontaxable.

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Question 20

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

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