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

If the alternate valuation date is elected by the executor in 2017,the total basis of inherited property will be more than what it would have been if the primary valuation date and amount had been used.

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

Janice bought her house in 2008 for $395,000.Since then,she has deducted $70,000 in depreciation associated with her home office and has spent $45,000 replacing all the old pipes and plumbing.She sells the house on July 1,2017.Her realtor charged $34,700 in commissions.Prior to listing the house with the realtor,she spent $300 advertising in the local newspaper.Don buys the house for $500,000 in cash and assumes her mortgage of $194,000.What is Janice's adjusted basis at the date of the sale and the amount realized?

How is the donee's basis calculated for the gift of appreciated property for a gift made before 1977? Assume the donor pays gift tax.

During 2017,Zeke and Alice,a married couple,decided to sell their residence,which had a basis of $200,000.They had owned and occupied the residence for 20 years.To make it more attractive to prospective buyers,they had the inside painted in April at a cost of $5,000 and paid for the work immediately.They sold the house in May for $800,000.Broker's commissions and other selling expenses amounted to $50,000.They purchased a new residence in July for $400,000.What is the recognized gain and the adjusted basis of the new residence?

Define an involuntary conversion.

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

Owen and Polly have been married for five years.Owen sells investment property to Polly for a realized gain of $140,000.Owen's gain of $140,000 is not recognized and Polly's basis for the property she purchased is her cost.

What requirements must be satisfied to receive nontaxable exchange treatment under § 1031?

If a taxpayer exchanges like-kind property under § 1031 and assumes a liability associated with the property received,the taxpayer is considered to have received boot in the transaction.

In 1973,Fran received a birthday gift of stock worth $75,000 from her aunt.The aunt had owned the stock (adjusted basis $50,000) for 10 years and paid gift tax of $27,000 on the transfer.Fran's basis in the stock is $75,000-the lesser of $77,000 ($50,000 + $27,000) or $75,000.

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 $230,000 and the fair market value is $410,000 on the date of the transfer.What are the tax consequences to Janet and to Dave as a result of the transfer?

A taxpayer who sells his or her principal residence at a realized loss can elect to recognize the loss even if a qualified residence is acquired during the statutory time period.

Jason owns Blue Corporation bonds (face value of $10,000),purchased on January 1,2017,for $11,000.The bonds have an annual interest rate of 6% and a maturity date of December 31,2026.If Jason elects to amortize the bond premium,what is his taxable interest income for 2017 and the adjusted basis for the bonds at the end of 2017 (assuming straight-line amortization is appropriate)?

Milton purchases land and a factory building for his business for $300,000 with $100,000 being allocated to the land.During the first year,Milton deducts cost recovery of $4,922.Milton's adjusted basis for the building at the end of the first year is $195,078 ($200,000 - $4,922).

If the taxpayer qualifies under § 1033 (nonrecognition of gain from an involuntary conversion) and the amount reinvested in replacement property exceeds the amount realized,the basis of the replacement property is:

Faith inherits an undivided interest in a parcel of land from her father on February 15,2017.Her father purchased the land on August 25,1990 and his basis for the land was $325,000.The fair market value of the land is $12,500,000 on the date of her father's death and is $11,000,000 six months later.The executor elects the alternate valuation date.Faith has nine brothers and sisters and each inherited a one-tenth interest. a.​What is Faith's adjusted basis for her one-tenth undivided interest in the land? b.What is her holding period for the land?

Paula inherits a home on July 1,2017 that had a basis in the hands of the decedent at death of $290,000 and a fair market value of $500,000 at the date of the decedent's death.She decides to sell her old principal residence,which she has owned and occupied for 9 years,with an adjusted basis of $125,000 and move into the inherited home.On September 16,2017,she sells the old residence for $600,000.Paula incurs selling expenses of $30,000 and legal fees of $2,000.She decides to add a pool,deck,pool house,and recreation room to the inherited home at a cost of $100,000.These additions are completed and paid for on November 1,2017.What is her recognized gain on the sale of her old principal residence and her basis in the inherited home?

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

Jacob owns land with an adjusted basis of $140,000 and a fair market value of $115,000.Determine the amount of realized and recognized gain or loss to the seller and the adjusted basis for the buyer for each of the following. a.Jacob sells the land for $115,000 to a corporation in which he owns 60% of the stock. b.Jacob sells the land for $115,000 to a partnership in which he has a capital and profits interest of 60%.