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Exam 7: Property Transactions: Basis, gain and Loss, and Nontaxable Exchange

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Question 41

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Emma gives 1,000 shares of Green,Inc.stock to her niece,Margaret.Emma's adjusted basis for the stock is $200,000 and the fair market value is $300,000.Seven months after the gift,Margaret is killed in an airplane accident.Emma inherits the stock which then is worth $350,000.What is the adjusted basis of the inherited stock to Emma?

A) $0.
B) $200,000.
C) $300,000.
D) $350,000.
E) None of the above.

F) A) and C)
G) C) and D)

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Question 42

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What is a deathbed gift and what tax consequences apply?

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A deathbed gift occurs when a donor make...

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Question 43

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Which of the following types of exchanges of insurance contracts qualify for nonrecognition treatment under § 1035?

If losses are disallowed in a related party transaction,the holding period for the buyer includes the holding period of the seller.

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

Mona purchased a business from Judah for $1,000,000.Judah's records and an appraiser provided her with the following information regarding the assets purchased: $\begin{array}{lcc} & \text { AdjustedBasis } & \text { FMV } \\\text { Land } & \$ 195,000 & \$ 270,000 \\\text { Building } & 310,000 & 450,000 \\\text { Equipment } & 95,000 & 180,000\end{array}$ What is Mona's adjusted basis for the land,building,and equipment?

Paula inherits a home on July 1,2013,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 16,2013,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 1,2013.What is her recognized gain on the sale of her old principal residence and her basis in the inherited home?

Lily exchanges a building she uses in her rental business for a building owned by Kendall,her brother,which she will use in her rental business.The adjusted basis of Lily's building is $120,000 and the fair market value is $170,000.Which of the following statements is correct?

When boot in the form of cash is received in a like-kind exchange,recognized gain is the greater of the boot received or the realized gain.

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:

Taylor inherited 100 acres of land on the death of his father in 2013.A Federal estate tax return was filed and this land was valued therein at $650,000,its fair market value at the date of the father's death.The father had originally acquired the land in 1967 for $112,000 and prior to his death he had expended $20,000 on permanent improvements.Determine Taylor's holding period for the land.

The exchange of unimproved real property located in Topeka (KS)for improved real property located in Atlanta (GA)does not qualify as a like-kind exchange.

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.

In order to qualify for like-kind exchange treatment under § 1031,which of the following requirements must be satisfied?

Patty's factory building,which has an adjusted basis of $475,000,is destroyed by fire on April 8,2013.Insurance proceeds of $500,000 are received on June 1,2013.She has a new factory building constructed for $490,000,which she occupies on October 1,2013.Assuming Patty's objective is to minimize the tax liability,calculate her recognized gain or loss and the basis of the new factory building.

In addition to other gifts,Megan made a gift of stock to Jeri in 1976.Megan had purchased the stock in 1974 for $7,500.At the time of the gift,the stock was worth $20,000.If Megan paid $850 of gift tax on the transaction in 1976,what is Jeri's gain basis for the stock?

In 2009,Harold purchased a classic car that he planned to restore for $12,000.However,Harold is too busy to work on the car and he gives it to his daughter Julia in 2013.At this time,the fair market value of the car has declined to $10,000.Harold paid no gift tax on the transaction.Julia completes some of the restoration herself with out-of-pocket costs of $5,000.She later sells the car for $30,000.What is Julia's recognized gain or loss on the sale of the car?

Morgan owned a convertible that he had purchased two years ago for $46,000 and which he transfers to his sole proprietorship.How is the sole proprietorship's basis for the car calculated? What additional information does Morgan need?

To qualify as a like-kind exchange,real property must be exchanged either for other real property or for personal property with a statutory life of at least 39 years.

Tariq sold certain U.S.Government bonds and State of Oregon bonds at a loss to offset short-term capital gain from a previous transaction.He felt that the U.S.Government and State of Oregon bonds were "good" investments,so he repurchased identical securities within one week.Do these transactions constitute wash sales?