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

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Question 21

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If the alternate valuation date is elected by the executor in 2012,the total basis of inherited property will be more than what it would have been if the primary valuation date and amount had been used.

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B) False

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Question 22

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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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If mandatory amortization were not requi...

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Question 23

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Molanda sells a parcel of land for $25,000 in cash and the buyer assumes Molanda's mortgage of $20,000 on the land.Molanda's amount realized is $45,000.

Misty owns stock in Violet,Inc.,for which her adjusted basis is $128,000.She receives a cash distribution of $50,000 from Violet.

Peggy uses a delivery van in her business.The adjusted basis is $39,000,and the fair market value is $34,000.The delivery van is stolen and Peggy receives insurance proceeds of $34,000.Determine Peggy's realized and recognized gain or loss.

Boyd acquired tax-exempt bonds for $430,000 in December 2012.The bonds,which mature in December 2017,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 2017.

Alice owns land with an adjusted basis of $610,000,subject to a mortgage of $350,000.Real estate taxes are $9,000 per calendar year and are payable on December 31.On April 1,2012,Alice sells her land subject to the mortgage for $650,000 in cash,a note for $600,000,and property with a fair market value of $120,000.What is the amount realized?

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?

In addition to other gifts,Megan made a gift of stock to Jeri in 1975.Megan had purchased the stock in 1973 for $7,500.At the time of the gift,the stock was worth $20,000.If Megan paid $850 of gift tax on the transaction in 1975,what is Jeri's gain basis for the stock?

In 2008,Harold purchased a classic car that he planned to restore for $12,000.However,Harold is too busy to work on the car and he gives it to his daughter Julia in 2012.At this time,the fair market value of the car has declined to $10,000.Harold paid no gift tax on the transaction.Julia completes some of the restoration herself with out-of-pocket costs of $5,000.She later sells the car for $30,000.What is Julia's recognized gain or loss on the sale of the car?

If property that has been converted from personal use to business use has appreciated in value,its basis for gain will be the same as the basis for loss.

Which of the following is correct?

Elvis owns all of the stock of Shadow Corporation.The accumulated earnings and profits of Shadow Corporation at the end of the year are a deficit of $12,000.The current earnings and profits are $25,000.Elvis' basis for his stock is $290,000.He receives a distribution of $340,000 on the last day of the tax year.How much dividend income and/or capital gain should Elvis report?

If the buyer assumes the seller's liability on the property acquired,the seller's amount realized is decreased by the amount of the liability assumed.

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.

A realized gain on the sale or exchange of a personal use asset is recognized,but a realized loss on the sale,exchange,or condemnation of a personal use asset is not recognized.

The amount of a corporate distribution qualifying for capital recovery treatment which exceeds the recipient's stock basis is treated as an ordinary gain.

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 a husband inherits his deceased wife's share of jointly owned property in a common law state,both the husband's original share and the share inherited from the deceased wife are stepped-up or down to the fair market value at the date of the wife's death.

Inez's adjusted basis for 9,000 shares of Cardinal,Inc.common stock is $900,000.During the year,she receives a 5% stock dividend that is a nontaxable stock dividend.