Question 1

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 2

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

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Question 3

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 4

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 5

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 6

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

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Question 7

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 8

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 9

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 10

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

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Question 11

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

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Question 12

Define fair market value as it relates to property transactions.

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Question 13

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

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Question 14

Mitch owns 1,000 shares of Oriole Corporation common stock (adjusted basis of $15,000). On April 27, 2016, he sells 400 shares for $5,200, while on May 5, 2016, he purchases 200 shares for $3,600.
a.​What is Mitch's recognized gain or loss resulting from these transactions?
a. and
b.​What is Mitch's basis for the stock acquired on May 5, 2016?
b. if he had sold the 400 shares on December 27, 2016, and purchased the 200 shares on January 5, 2017?
c.​Could Mitch have obtained different tax consequences in

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Question 15

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 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

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 18

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 19

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

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Question 20

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

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Quiz 7: Property Transactions: Basis, Gain and Loss, and Nontaxable Exchanges