Question 1

On September 18,2011,Jerry received land and a building from Ted as a gift.Ted had purchased the land and building on March 5,2008,and his adjusted basis and the fair market value at the date of the gift were as follows:
  Ted paid gift tax on the transfer to Jerry of $96,000.

Accepted Answer

The basis is allocated to the land and building as follows:
Land: ($200,000/$300,000)´ $260,070 = $173,380
Building: ($100,000/$300,000)´ $260,070 = $86,690
Jerry's holding period begins on March 5,2008.
*The $287,000 is equal to the fair market value of the land and building of $300,000 reduced by the per donee annual exclusion of $13,000.

Question 2

Ed and Cheryl have been married for 27 years.They own land jointly with a basis of $300,000.Ed dies in 2011,when the fair market value of the land is $500,000.Under the joint ownership arrangement,the land passed to Cheryl.

Accepted Answer

The answer of Ed and Cheryl have been married for...

Question 3

Mel gives a parcel of land to his son,Scott.He had purchased the land in 1998 for $150,000 and its fair market value on the date of the gift is $142,000.No gift tax is paid.Scott subsequently sells the land for $148,000.

Accepted Answer

Note that a realized gain of $6,000 results if the basis for loss is used.
Since the amount realized of $148,000 is between Scott's loss basis of $142,000 and gain basis of $150,000,neither gain nor loss results.

Question 4

Marge purchases the Kentwood Krackers,a AAA level baseball team,for $1.5 million.The appraised values of the identified assets are as follows:
  The Krackers have won the pennant for the past two years.Determine Marge's adjusted basis for the assets of the Kentwood Krackers.

Accepted Answer

The answer of Marge purchases the Kentwood Krackers,a AAA level...

Question 5

Felix gives 100 shares of stock to his daughter,Monica.The stock was acquired in 2002 for $20,000,and at the time of the gift,it had a fair market value of $60,000.Felix paid a gift tax of $6,000.

Accepted Answer

The answer of Felix gives 100 shares of stock to...

Question 6

Inez's adjusted basis for 7,000 shares of Cardinal,Inc.common stock is $700,000.During the year,she receives a 6% stock dividend that is a nontaxable stock dividend.

Accepted Answer

The answer of Inez's adjusted basis for 7,000 shares of...

Question 7

Nigel purchased a blending machine for $125,000 for use in his business.As to the machine,he has deducted MACRS cost recovery of $31,024,maintenance costs of $5,200,and repair costs of $4,000.Calculate Nigel's adjusted basis for the machine.

Accepted Answer

The answer of Nigel purchased a blending machine for $125,000...

Question 8

Ollie owns a personal use car for which he originally paid $42,000.He trades the car in on a sports utility vehicle (SUV)paying the automobile dealer cash of $24,000.If the negotiated price of the SUV is $45,000,what is Ollie's recognized gain or loss and his adjusted basis for the SUV?

Accepted Answer

The answer of Ollie owns a personal use car for...

Question 9

Annette purchased stock on March 1,2011,for $150,000.At December 31,2011,it was worth $160,000.She also purchased a bond on September 1,2011,for $20,000.At year end,it was worth $12,000.Determine Annette's realized and recognized gain or loss.

Accepted Answer

The answer of Annette purchased stock on March 1,2011,for $150,000.At...

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.

Accepted Answer

The answer of On January 15 of the current taxable...

Question 11

Hilary receives $10,000 for a 13-foot wide utility easement along one of the boundaries to her property.The easement provides that no structure can be built on that portion of the property.Her adjusted basis for the property is $200,000 and the easement covers 15% of the total acreage.Determine the effect of the $10,000 payment on Hilary's gross income and her basis for the property.

Accepted Answer

The answer of Hilary receives $10,000 for a 13-foot wide...

Question 12

Hubert purchases Fran's jewelry store for $950,000.The identifiable assets of the business are as follows:
  Hubert and Fran agree to assign $110,000 to a 7-year covenant not to compete.How should Hubert allocate the $950,000 purchase price to the assets?

Accepted Answer

The answer of Hubert purchases Fran's jewelry store for $950,000.The...

Question 13

Amanda uses a delivery van in her business.The adjusted basis is $29,000,and the fair market value is $25,000.The delivery van is stolen and Amanda receives insurance proceeds of $25,000.Determine Amanda's realized and recognized gain or loss.

Accepted Answer

The answer of Amanda uses a delivery van in her...

Question 14

Robert sold his ranch which was his principal residence during the current taxable year.At the date of the sale,the ranch had an adjusted basis of $460,000 and was encumbered by a mortgage of $200,000.The buyer paid him $500,000 in cash,agreed to take the title subject to the $200,000 mortgage,and agreed to pay him $100,000 with interest at 6 percent one year from the date of sale.How much is Robert's recognized gain on the sale?

Accepted Answer

The answer of Robert sold his ranch which was his...

Question 15

Boyd acquired tax-exempt bonds for $430,000 in December 2011.The bonds,which mature in December 2016,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 2016.

Accepted Answer

The answer of Boyd acquired tax-exempt bonds for $430,000 in...

Question 16

Misty owns stock in Violet,Inc.,for which her adjusted basis is $112,000.She receives a cash distribution of $40,000 from Violet.

Accepted Answer

The answer of Misty owns stock in Violet,Inc.,for which her...

Question 17

Albert is considering two options for selling land for which he has an adjusted basis of $70,000 and on which there is a mortgage of $100,000.Under the first option,Albert will sell the land for $150,000 with a stipulation in the sales contract that he liquidate the mortgage before the sale is complete.Under the second option,Albert will sell the land for $50,000 and the buyer will assume the mortgage.Calculate Albert's recognized gain under both options.

Accepted Answer

The answer of Albert is considering two options for selling...

Question 18

Elbert gives stock worth $28,000 (no gift tax resulted)to his friend,Jeff,on June 8,2011.Elbert purchased the stock on September 1,2004,and his adjusted basis is $22,000.Jeff dies on December 8,2012,and bequeaths the stock to Elbert.At that date,the fair market value of the stock is $31,000.

Accepted Answer

The answer of Elbert gives stock worth $28,000 (no gift...

Question 19

Renee purchases taxable bonds with a face value of $200,000 for $212,000.The annual interest paid on the bonds is $10,000.Assume Renee elects to amortize the bond premium.The total premium amortization for the first year is $1,600.

Accepted Answer

The answer of Renee purchases taxable bonds with a face...

Question 20

Teresa inherits land from her first cousin,Drew,in 2011.Drew's adjusted basis in the land (purchased in September 2008)was $200,000 and it was included in his estate at a value of $270,000.

Accepted Answer

The answer of Teresa inherits land from her first cousin,Drew,in...

Quiz 13: Property Transactions

On September 18,2011,Jerry received land and a building from Ted as a gift.Ted had purchased the land and building on March 5,2008,and his adjusted basis and the fair market value at the date of the gift were as follows: Ted paid gift tax on the transfer to Jerry of $96,000.