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

What is a deathbed gift and what tax consequences apply?

Joseph converts a building (adjusted basis of $50,000 and fair market value of $40,000) from personal use to business use.Justin receives a building with a $40,000 fair market value ($50,000 donor's adjusted basis) from his mother as a gift.Discuss the tax consequences with respect to Joseph's and Justin's adjusted basis.

Robert sold his ranch which was his principal residence during the current taxable year.At the date of the sale, the ranch had an adjusted basis of $460,000 and was encumbered by a mortgage of $200,000.The buyer paid him $500,000 in cash, agreed to take the title subject to the $200,000 mortgage, and agreed to pay him $100,000 with interest at 6 percent one year from the date of sale.How much is Robert's recognized gain on the sale?

For gifts made after 1976, when will part of the gift tax paid by the donor be added to the donee's basis?

Felix gives 100 shares of stock to his daughter, Monica. The stock was acquired in 2003 for $20,000, and at the time of the gift, it had a fair market value of $60,000. Felix paid a gift tax of $6,000.

Evelyn's office building is destroyed by fire on July 12, 2012.The adjusted basis is $315,000.She receives insurance proceeds of $350,000 on August 31, 2012.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.

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?

Define qualified small business stock under § 1045.

Discuss the treatment of losses from involuntary conversions.

Larry, who lived in Maine, acquired a personal residence eight years ago when he was 42 years old.During this period he has occupied the residence for only nine months (out of 12) each year due to winter vacations in Florida.Is Larry eligible for exclusion of gain under § 121?

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.

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

Melissa, age 58, marries Arnold, age 50, on June 1, 2012.Melissa decides to sell her principal residence on August 1, 2012, which she has owned and occupied for the past 30 years.Arnold has never owned a house.However, while he was married to Kelly who died 6 months prior to his marriage to Melissa, Kelly used the § 121 election on the sale of her residence in January 2010 to reduce her realized gain from $123,000 to $0.Kelly used the sales proceeds to pay off Arnold's gambling debts.Can Melissa elect the § 121 exclusion on the sale of her residence? What is the maximum § 121 exclusion available to Melissa and Arnold if they file a joint return?

Ed and Cheryl have been married for 27 years.They own land jointly with a basis of $300,000.Ed dies in 2012, when the fair market value of the land is $500,000.Under the joint ownership arrangement, the land passed to Cheryl.

After 5 years of marriage, Dave and Janet decided to get a divorce.As part of the divorce settlement, Janet transfers to Dave the house she purchased prior to their marriage.Janet's adjusted basis for the house is $125,000 and the fair market value is $200,000 on the date of the transfer.What are the tax consequences to Janet and to Dave as a result of the transfer?

Elbert gives stock worth $28,000 (no gift tax resulted) to his friend, Jeff, on June 8, 2012.Elbert purchased the stock on September 1, 2005, and his adjusted basis is $22,000.Jeff dies on December 8, 2013, and bequeaths the stock to Elbert.At that date, the fair market value of the stock is $31,000.

Taylor owns common stock in Taupe, Inc., with an adjusted basis of $100,000.She receives a preferred stock dividend which is nontaxable.

Lois received nontaxable stock rights with a fair market value of $4,000.The fair market value of the stock on which the rights were received is $24,000 (cost $14,000).Assume the rights are exercised by paying $31,000 plus the rights.Discuss how to calculate the basis of the old stock and the basis of the new stock.

To be eligible to elect postponement of gain treatment for an involuntary conversion, what are the three tests for qualifying replacement property?

Marge purchases the Kentwood Krackers, a AAA level baseball team, for $1.5 million.The appraised values of the identified assets are as follows: The Krackers have won the pennant for the past two years.Determine Marge's adjusted basis for the assets of the Kentwood Krackers.