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

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Question 31

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Alvin is employed by an automobile dealership as its manager.As such,he purchased an SUV for $32,000 (fair market value is $48,000) .No other employees are permitted a discount.What is Alvin's basis in the SUV?

A) $16,000.
B) $32,000.
C) $48,000.
D) $80,000.
E) None of the above.

F) A) and D)
G) A) and B)

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Question 32

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Ashley sells real property for $280,000.The buyer pays $4,000 in property taxes that had accrued during the year while the property was still legally owned by Ashley.In addition,Ashley pays $14,000 in commissions and $3,000 in legal fees in connection with the sale.How much does Ashley realize (the amount realized) from the sale of her property?

A) $259,000.
B) $263,000.
C) $267,000.
D) $280,000.
E) None of the above.

F) B) and E)
G) A) and B)

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Question 33

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If the fair market value of the property on the date of death is greater than on the alternate valuation date,the use of the alternate valuation amount is mandatory.

The basis of inherited property usually is its fair market value on the date of the decedent's death.

The basis of personal use property converted to business use is:

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).

Realized losses from the sale or exchange of stock are disallowed if within 30 days before or 30 days after the sale or exchange,the taxpayer acquires substantially identical stock.

Etta received nontaxable stock rights on October 3,2012.She allocated $12,000 of the $30,000 basis for the associated stock to the stock rights.The stock rights are exercised on November 8,2012.The exercise price for the stock is $42,000.What is Etta's basis for the acquired stock?

If a seller assumes the buyer's liability on the property acquired,the buyer's adjusted basis for the property is increased by the amount of the liability assumed.

A donee receives depreciable property worth $85,000 (basis to donor of $150,000)with no gift tax being paid on the transfer.The donee's basis for depreciation purposes is $85,000.

Realized gain or loss is measured by the difference between the amount realized from the sale or other disposition of property and the property's adjusted basis at the date of disposition.

Which of the following statements is correct?

What is a deathbed gift and what tax consequences apply?

Sandra's automobile,which is used exclusively in her trade or business,was damaged in an accident.The adjusted basis prior to the accident was $11,000.The fair market value before the accident was $10,000 and the fair market value after the accident is $6,000.Insurance proceeds of $3,200 are received.What is Sandra's adjusted basis for the automobile after the casualty?

Kelly inherits land which had a basis to the decedent of $95,000 and a fair market value of $50,000 on August 4,2012,the date of the decedent's death.The executor distributes the land to Kelly on November 12,2012,at which time the fair market value is $49,000.The fair market value on February 4,2013,is $45,000.In filing the estate tax return,the executor elects the alternate valuation date.Kelly sells the land on June 10,2013,for $48,000.What is her recognized gain or loss?

If Wal-Mart stock increases in value during the tax year by $4,500,the amount realized is a positive $4,500.

Explain how the sale of investment property at a loss to a brother is treated differently from a sale to a nephew.

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

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

Pedro borrowed $125,000 to purchase a machine costing $150,000.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 $115,000 and $21,000.Pedro sells the machine subject to the two liabilities for $27,000.What is his realized gain or loss?