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

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Question 1

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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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If the bond sales resulted in the recogn...

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Question 2

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Lynn transfers her personal use automobile to her business (a sole proprietorship).The car's adjusted basis is $35,000 and the fair market value is $12,000.No cost recovery had been deducted by Lynn, since she held the car for personal use.Determine the adjusted basis of the car to Lynn's sole proprietorship including the basis for cost recovery.

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In this circumstance, the car is dual ba...

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Janet, age 68, sells her principal residence for $500,000.She purchased it twenty-two years ago for $150,000.Selling expenses are $30,000 and repair expenses to get the house in a marketable condition to sell are $15,000.Janet's objective is to minimize the taxes she must pay associated with the sale.Calculate her recognized gain.

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

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

Discuss the relationship between realized gain and boot received in a § 1031 like-kind exchange.

Hubert purchases Fran's jewelry store for $950,000.The identifiable assets of the business are as follows: 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?

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.

Libby's principal residence is destroyed by a tornado. She is single and her realized gain is $360,000. Is it possible for Libby's recognized gain to be $0?

What types of exchanges of insurance contracts are eligible for nonrecognition treatment under § 1035?

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?

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

Katrina, age 58, rented (as a tenant) the house that was her principal residence from January 1, 2012 through December 31, 2013.She purchased the house on January 1, 2014, for $150,000 and continued to occupy it through June 30, 2015.She leased it to a tenant from July 1, 2015, through December 31, 2016.On January 1, 2017, 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.

Mandy and Greta form Tan, Inc., by transferring the following assets to the corporation in exchange for 5,000 shares of stock each. Mandy: Cash of $450,000 Greta: Land (worth $450,000; adjusted basis of $90,000). How much gain must Tan recognize on the receipt of these assets?

Can related parties take advantage of the like-kind exchange provisions?

Discuss the relationship between the postponement of realized gain under § 1031 (like-kind exchanges) and the adjusted basis and holding period for the replacement property.

Samuel's hotel is condemned by the City Housing Authority on July 5, 2012, for which he is paid condemnation proceeds of $950,000.He first received official notification of the pending condemnation on May 2, 2012.Samuel's adjusted basis for the hotel is $600,000 and he uses a fiscal year for tax purposes with a September 30 tax year-end.

Butch sells land with an adjusted basis of $88,000 and a fair market value of $160,000 to Cynthia, his wife, for $160,000.Discuss how the tax consequences would differ if Butch and Cynthia had never been married.

On January 5, 2012, Waldo sells his principal residence with an adjusted basis of $270,000 for $690,000.He has owned and occupied the residence for 15 years.He pays $35,000 in commissions and $2,000 in legal fees in connection with the sale.One month before the sale, Waldo painted the exterior of the house at a cost of $5,000 and repaired various items at a cost of $3,000.On October 15, 2012, Waldo purchases a new home for $600,000.On November 15, 2013, he pays $25,000 for completion of a new room on the house, and on January 14, 2014, he pays $15,000 for the construction of a pool.What is the Waldo's recognized gain on the sale of his old principal residence and what is the basis for the new residence?

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