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

Misty owns stock in Violet, Inc., for which her adjusted basis is $128,000.She receives a cash distribution of $50,000 from Violet.

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

Justin owns 1,000 shares of Oriole Corporation common stock (adjusted basis of $9,800). On April 27, 2012, he sells 300 shares for $2,800, while on May 5, 2012, he purchases 200 shares for $2,500.

Describe the relationship between the recovery of capital doctrine and the realized and recognized gain and loss concepts.

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.

Distinguish between a direct involuntary conversion and an indirect involuntary conversion.

For a corporate distribution of cash or other property to a shareholder, when does dividend income or a return of capital result?

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

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.

For each of the following involuntary conversions, determine if the property qualifies as replacement property.

Sam and Cheryl, husband and wife, own property jointly.The property has an adjusted basis of $400,000 and a fair market value of $500,000.

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?