Exam 9: Acquisitions of Property

Hilliard receives a gift of stock from Martha on June 1 of the current year. Martha paid $15,000 for the stock several years ago. Martha pays a gift tax of $400 on the transfer. I.If the fair market value of the stock on June 1 of the current year is $20,000, Hilliard has a basis in the stock of $15,100. II.If the fair market value of the stock on June 1 of the current year is $14,000, and Hilliard sells the stock for $13,000 on June 2 of the current year, Hilliard realizes a loss on the sale of $1,000. ​

Rosie inherits 1,000 shares of Northern Skies Airline Corporation stock from the estate of her Uncle Tony. Tony died on July 2, 2018. The stock's value on July 2, 2018, is $4,000. Tony's basis in the stock was $3,000. The stock has a fair market value of $7,000 on October 1, 2018, when it is transferred to her. Rosie sells the stock October 11, 2018. What is Rosie's basis in the stock?

Match each statement with the correct term below. -Indirect purchase

Ludwig died on April 5, 2018. As part of his will, he leaves land for which he paid $6,000 on December 31, 2017, to his son Don. On April 5, 2018, the land is worth $11,000. However, due to local real estate conditions, the land declines in value. On July 28 it is worth only $10,000; it declines further to $9,000 on October 5 and plunges to $7,000 on December 18. I.In the absence of any special elections, Don's basis in the land is $11,000. II.If the executor elects the alternate valuation date and distributes the land to Don on July 28, Don's basis in the land will be $9,000. III.If the executor elects the alternate valuation date and distributes the land to Don on December 18, Don's basis will be $7,000. IV.In the absence of any special elections, if the executor distributes the land to Don on October 5, Don's basis in the land will be $9,000. ​

On June 10, 2017, Wilhelm receives a gift of gold coins with a fair market value of $10,000. The gold coins had an adjusted basis of $12,000 to the donor. Wilhelm sells the gold coins August 1, 2018, for $8,000. What is the amount of the recognized gain or loss on the sale?

Match each statement with the correct term below. -Real property

Match each statement with the correct term below. -Split basis

Makemore Company purchases a factory for $800,000. The purchase price is properly allocated 90% to the building and 10% to the land. In the first year, Makemore adds a storage shed to the building at a cost of $8,000. The utility company pays Makemore $1,500 for an easement to run utility lines across the land. A total depreciation of $45,000 is deducted over the 3 years. Determine the adjusted basis of the building and the land as of the end of year 3:

For each of the following situations, identify the property's adjusted basis and briefly explain how you determined the adjusted basis amount. a.Mei-ling purchased 150 shares of MAPCO stock for $5,400 in 2005. On February 28, 2018, Mei-ling purchased another lot of 150 shares of identical stock for $3,750. Mei-ling sells the original 150 shares of MAPCO stock for $3,300 on March 15, 2018. What is Mei-ling's basis in the 150 shares she purchased February 28, 2018? b.Ralph gives Linda 500 shares of Money Maker common stock. The stock cost Ralph $30,000 several years earlier. The stock is worth $50,000 on the date it is given to Linda, and Ralph pays $1,500 of gift tax on the transfer. What is Linda's basis in the stock if she sells it for $20,000? c.Assume the same facts as in part b, except that the fair market value of the stock on the date of the gift is $25,000. d.Leon receives a van as a gift from his father. His father's basis in the van is $30,000. The fair market value at the date of the gift is $20,000. A gift tax of $2,000 is paid on the gift. Leon uses the van in his pizza delivery service for three years, at which time he sells it for $8,000. During the three years he used the van in his business, Leon deducts $10,000 in depreciation on the van. e.Bonita owns a house that she used as a residence until this year. She paid $150,000 for the house on November 4, 2003. On April 4, 2018, Bonita purchases a new residence and converts the former residence into office space to use in her real estate business. The former residence is worth $180,000 on April 4, 2018.?

Jenny purchased 1,000 shares of Hewlett Corporation preferred stock for $66,000 two years ago. During the current year, Jenny receives a 10% nontaxable stock dividend at a time when the stock has a fair market value of $40. What is Jenny's basis in the stock dividend shares?

Whenever the donor's adjusted basis is used to compute a gain or loss on the donee's disposition of property received by gift, the donee's holding period is always the period of time the property was owned by the donee only.

Taxpayers who construct property for their own use must capitalize both the direct and indirect construction costs.

Tony died on April 5, 2018. As part of his will, he leaves land that he paid $6,000 for in 2004 to his son Philip. On April 5, 2018, the land is worth $11,000. However, due to local real estate conditions, the land continues to decline in value. On July 28 it is worth only $10,000; it declines further to $9,000 on October 5 and plunges to $7,000 on December 18. In the absence of any special elections, I.Philip's basis in the land is $6,000. II.If the executor distributes the land to Philip on July 28, Philip's basis in the land will be $10,000. ​

Dana purchases an automobile for personal use for $27,000. After using it for three years, Dana converts the automobile to business use when the fair market value is $19,000. After a few months of business use, Dana sells the automobile for $18,000. What is the amount of gain or loss recognized on the sale of the automobile?

Dustin buys 200 shares of Monroe Corporation common stock on December 1, 2017, for $2,000. He buys an additional 200 shares for $1,800 on December 23, 2018. On December 28, 2018, Dustin sells the first 200 shares for $1,700. He sells the last 200 for $1,600 on June 15, 2019. What is (are) the amount(s) and the year of recognition of losses that Dustin can recognize? ​ 2018 2019

Harold purchases land and a building by paying cash of $35,000, and assuming the seller's $82,000 mortgage. In addition, Harold pays $3,000 of legal fees related to the purchase. For property tax purposes, the land is valued at $17,000 and the building at $34,000. Harold's basis in the building is

Gordon is the sole shareholder of Whitman Corporation, an S corporation. At the beginning of the year, Gordon's basis in his Whitman stock is $100,000. During the year, Whitman Corporation has operating income of $50,000; dividends from domestic corporations of $15,000; tax-exempt interest of $5,000; nontaxable life insurance proceeds of $10,000 on the death of a key employee; and a capital loss of $15,000. Whitman pays no dividends. What is Gordon's year-end basis in Whitman stock (after the distribution)?

Reiko buys 200 shares of Saratoga Corporation common stock on December 10, 2017, for $2,000. He buys an additional 200 shares for $1,800 on December 23, 2018. On December 28, 2018, Reiko sells 100 of the first 200 shares for $800. He sells the remaining 300 shares for $2,500 on November 15, 2019. What is(are) the amount(s) and the year of recognition of losses that Reiko can recognize? ​ 2018 2019

Valerie receives a painting as a gift from her aunt. The painting is valued at $6,000 on the date of the gift. Valerie's aunt's basis in the painting is $13,000. Three years later Valerie sold the painting for $8,000. What is the amount of gain or (loss) recognized by Valerie on the sale?

Lu is interested in purchasing the assets of Idaho Potato Chip Company. Idaho's assets are: ? Adjusted Basis Fair Market Value Cash \ 2,300 \ 2,300 Inventory \ 16,500 \ 19,200 Equipment \ 13,000 \ 9,000 Land \ 10,000 \ 40,500 Building \ 76,600 \ 129,000 \ 118,400 \ 200,000 All of the following statements are correct except: