FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 7: Property Transactions: Basis, gain and Loss, and Nontaxable Exchange

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 61

Essay

Review LaterAdd Note

Review Later

On September 18,2013,Jerry received land and a building from Ted as a gift.Ted had purchased the land and building on March 5,2010,and his adjusted basis and the fair market value at the date of the gift were as follows: $\begin{array}{lcc}\text { Assset } & \text { AdjustedBasis } & \text { FMV } \\\hline \text { Land } & \$ 150,000 & \$ 200,000 \\\text { Buildling } & 90,000 & 100,000\end{array}$ Ted paid gift tax on the transfer to Jerry of $100,000. a. Determine Jerry's adjusted basis and holding period for the land and buidding b. Assume instead that the FMV of the land was $\$ 89,000$ and the FMV of the building was $\$ 60,000$ . Determine Jerry's adjusted basis and holding period for the land and building

Correct Answer

verified

The basis is allocated to the land and ...

View Answer

Show Answer

Question 62

Essay

Review LaterAdd Note

Review Later

Define fair market value as it relates to property transactions.

Correct Answer

verified

The fair market value of property receiv...

View Answer

Show Answer

Question 63

Essay

Review LaterAdd Note

Eunice Jean exchanges land held for investment located in Rolla,Missouri,for land to be held for investment located near Madrid,Spain.Her basis for the land given up is $450,000 and the fair market value of the land received is $500,000.Eunice Jean also receives cash of $45,000. $\text { a. What is Eunice Jean's secognized gain? }$ $\text { b. What is her basis for the land received? }$

Brett owns investment land located in Tucson,Arizona.He exchanges it for other investment land.In which of the following locations may the other investment land be located and enable Brett to qualify for § 1031 like-kind exchange treatment?

Parker bought a brand new Ferrari on January 1,2013,for $125,000.Parker was fatally injured in an auto accident on June 23,2013,when the fair market value of the car was $105,000.Parker was driving a loaner car from the Ferrari dealership while his car was being serviced.In his will,Parker left the Ferrari to his best friend,Ryan.Ryan's holding period for the Ferrari begins on January 1,2013.

For the loss disallowance provision under § 267,related parties include certain family members,a shareholder and his or her controlled corporation (i.e.,greater than 50% in value of the corporation's outstanding stock),and a partner and his or her controlled partnership (i.e.,greater than 50% of the capital interests or profits interest in the partnership).

Abby exchanges an SUV that she has held for personal use plus $24,000 for a new SUV which she will use exclusively in her sole proprietorship business.This exchange qualifies for nontaxable exchange treatment.

Hubert purchases Fran's jewelry store for $950,000.The identifiable assets of the business are as follows: $\begin{array}{lrr}&{\text { Basis }} & \text { FMV } \\\text { Inventory } & \$ 90,000 & \$ 97,000 \\\text { Accountsreceivable } & 55,000 & 50,000 \\\text { Building } & 100,000 & 225,000 \\\text { Land } & 280,000 & 300,000\end{array}$ 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?

Pedro borrowed $250,000 to purchase a machine costing $300,000.He later borrowed an additional $25,000 using the machine as collateral.Both notes are nonrecourse.Eight years later,the machine has an adjusted basis of zero and two outstanding note balances of $145,000 and $18,000.Pedro sells the machine subject to the two liabilities for $45,000.What is his realized gain or loss?

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

The adjusted basis for a taxable bond purchased at a premium is reduced if the amortization election is made.The amount of the amortized premium is treated as an interest deduction.

Gains and losses on nontaxable exchanges are deferred because the tax law recognizes that nontaxable exchanges result in a change in the substance but not the form of the taxpayer's relative economic position.

Nancy gives her niece a crane to use in her business with a fair market value of $61,000 and a basis in Nancy's hands of $80,000.No gift tax was paid.What is the niece's basis for depreciation (cost recovery) ?

Lola owns land as an investor.She exchanges the land for a warehouse which she leases to a tenant who uses it to store his business inventory.The exchange doesqualify for like-kind exchange treatment.

Which of the following statements is correct with respect to qualified replacement property in a § 1033 involuntary conversion?

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.

Ralph gives his daughter,Angela,stock (basis of $8,000; fair market value of $6,000) .No gift tax results.If Angela subsequently sells the stock for $10,000,what is her recognized gain or loss?

In October 2013,Ben and Jerry exchange investment realty in a § 1031 like-kind exchange.Ben bought his real estate in 2003 while Jerry purchased his in 2006.In addition to the realty,Ben receives Pearl,Inc.stock worth $10,000 from Jerry.Ben's realized gain is $30,000.On what date does the holding period for Ben's realty received from Jerry begin? When does the holding period for the stock he receives begin?

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?

Jamie 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 nephews.She makes a gift of depreciated property (i.e.,adjusted basis exceeds fair market value)to Will,a gift of appreciated property (i.e.,fair market value exceeds adjusted basis)to Jim,and leaves appreciated property to Sam in her will.Each of the properties has the same fair market value.From an income tax perspective,which nephew is her favorite?