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Exam 13: Property Transactions: Determination of Gain or Loss, basis Considerations, and Nontaxabl

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Question 101

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Helen purchases a $10,000 corporate bond at a premium of $1,000 and elects to amortize the premium.On the later sale of the bond for $10,800,she has amortized $300 of the premium.Helen has a recognized gain of $800 ($10,800 amount realized - $10,000 adjusted basis).

A) True
B) False

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Question 102

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In addition to other gifts,Megan made a gift of stock to Jeri in 1976.Megan had purchased the stock in 1974 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 1976,what is Jeri's gain basis for the stock?

A) $7,500
B) $8,350
C) $9,017
D) $20,000
E) None of the above

F) A) and E)
G) D) and E)

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Question 103

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Jake exchanges an airplane used in his business for a smaller airplane to be used in his business.His adjusted basis for the airplane is $325,000 and the fair market value is $310,000.The fair market value of the smaller airplane is $300,000.In addition,Jake receives cash of $10,000.Calculate Jake's realized and recognized gain or loss and his adjusted basis for the assets received.

Annette purchased stock on March 1,2015,for $200,000.At December 31,2015,it was worth $210,000.She also purchased a bond on September 1,2015,for $20,000.At year end,it was worth $15,000.Determine Annette's realized and recognized gain or loss.

Which of the following statements is correct?

Jason owns Blue Corporation bonds (face value of $10,000) ,purchased on January 1,2015,for $11,000.The bonds have an annual interest rate of 8% and a maturity date of December 31,2024.If Jason elects to amortize the bond premium,what is his taxable interest income for 2015 and the adjusted basis for the bonds at the end of 2015 (assuming straight-line amortization is appropriate) ?

If the amount of a corporate distribution is less than the amount of the corporate earnings and profits,the return of capital concept does not apply and the shareholders' adjusted basis for the stock remains unchanged.

What effect do the assumption of liabilities have on a § 1031 like-kind exchange?

Evelyn's office building is destroyed by fire on July 12,2015.The adjusted basis is $315,000.She receives insurance proceeds of $350,000 on August 31,2015.Calculate the amount that Evelyn must reinvest in qualifying property in order that her recognized gain be $20,000.Assume she elects § 1033 (nonrecognition of gain from an involuntary conversion) postponement treatment.

Karen owns City of Richmond bonds with a face value of $10,000.She purchased the bonds on January 1,2015,for $11,000.The maturity date is December 31,2024.The annual interest rate is 8%.What is the amount of taxable interest income that Karen should report for 2015,and the adjusted basis for the bonds at the end of 2015,assuming straight-line amortization is appropriate?

Gift property (disregarding any adjustment for gift tax paid by the donor) :

Under what circumstances may a partial § 121 exclusion be available even though the taxpayer has used the § 121 exclusion within the two-year period preceding the sale of the current residence?

Yolanda buys a house in the mountains for $450,000 which she uses as her personal vacation home.She builds an additional room on the house for $40,000.She sells the property for $560,000 and pays $28,000 in commissions and $4,000 in legal fees in connection with the sale.What is the recognized gain or loss on the sale of the house?

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.

The holding period of property acquired by gift may begin on:

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.

Why is it generally undesirable to pass property by death when its fair market value is less than basis?

Katrina,age 58,rented (as a tenant) the house that was her principal residence from January 1,2015 through December 31,2016.She purchased the house on January 1,2017,for $150,000 and continued to occupy it through June 30,2018.She leased it to a tenant from July 1,2018,through December 31,2019.On January 1,2020,she sells the house for $350,000.She incurs a realtor's commission of $20,000.Calculate her recognized gain if her objective is to minimize the recognition of gain and she does not intend to acquire another residence.

Molly exchanges a small machine (adjusted basis of $85,000;fair market value of $78,000) used in her business and investment land (adjusted basis of $10,000;fair market value of $15,000) for a large machine (fair market value of $93,000) to be used in her business in a like-kind exchange.What is Molly's recognized gain or loss?

Morgan owned a convertible that he had purchased two years ago for $46,000 and which he transfers to his sole proprietorship.How is the sole proprietorship's basis for the car calculated? What additional information does Morgan need?