Question 1

Alice 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 nieces.She makes a gift of depreciated property (i.e. ,adjusted basis exceeds fair market value)to Marsha,a gift of appreciated property (i.e. ,fair market value exceeds adjusted basis)to Jan,and leaves appreciated property to Cindy in her will.Each of the properties has the same fair market value.From an income tax perspective,which niece is her favorite?

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Question 2

Seth and Cheryl,husband and wife,own property jointly.The property has an adjusted basis of $25,000 and a fair market value of $30,000.

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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

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

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Question 5

Mitchell owned an SUV that he had purchased two years ago for $48,000 and which he transfers to his sole proprietorship.How is the sole proprietorship's basis for the SUV calculated? What additional information does Mitchell need?

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Question 6

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 7

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

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Question 8

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

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Question 9

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 10

For gifts made after 1976,when will part of the gift tax paid by the donor be added to the donee's basis?

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Question 11

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 12

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

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Question 13

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

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Question 14

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

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Question 15

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 16

Can dividend treatment result to a shareholder on a distribution from a corporation that has no E & P?

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Question 17

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

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Question 18

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 19

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

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Question 20

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?

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Quiz 13: Part 2--Property Transactions: Determination of Gain or Loss,basis Considerations,and Nontaxable Exchanges