CHAPTER 14–PROPERTY TRANSACTIONS

| November 9, 2018

110.Hilary receives $10,000 for a 15-foot wide utility
easement along one of the boundaries to her property. The easement provides
that no structure can be built on that portion of the property. Her adjusted
basis for the property is $200,000 and the easement covers 15% of the total
acreage. Determine the effect of the $10,000 payment on Hilary’s gross income
and her basis for the property.

111.Ollie owns a personal use car for which he originally paid
$42,000. He trades the car in on a sports utility vehicle (SUV) paying the
automobile dealer cash of $24,000. If the negotiated price of the SUV is
$45,000, what is Ollie’s recognized gain or loss and his adjusted basis for the
SUV?

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112.Omar
has the following stock transactions during 2010:

Date

Number of

Number

Selling

Stock

purchased

shares sold

of shares

Basis

price

Orange

1/2008

100

$1,000

Blue

6/2008

200

3,000

Yellow

4/2009

50

1,250

Blue

2/2010

150

1,800

Yellow

3/2010

175

5,250

Blue

7/2010

250

$3,500

Yellow

11/2010

200

7,200

a.
What is Omar’s recognized gain or loss on the
stock sales if his objective is to minimize the recognized gain and to maximize
the recognized loss?
b.
What is Omar’s recognized gain or loss if he does
not identify the shares sold?

113.Hubert purchases Fran’s jewelry store for $950,000. The
identifiable assets of the business are as follows:

Basis

FMV

Inventory

$ 90,000

$ 97,000

Accounts
receivable

55,000

50,000

Building

100,000

225,000

Land

280,000

300,000

Hubert and
Fran agree to assign $110,000 to a 7-year covenant not to compete. How should
Hubert allocate the $950,000 purchase price to the assets?

19

114.Marge purchases the Kentwood
Krackers, a AAA level baseball team, for $1.5 million. The appraised values of
the identified assets are as follows:

Prepaid
season tickets

$150,000

Stadium
lease

400,000

Player
contracts

500,000

Equipment

100,000

The
Krackers have won the pennant for the past two years. Determine Marge’s
adjusted basis for the assets of the Kentwood Krackers.

115.Inez’s adjusted basis for 6,000 shares of Cardinal, Inc.
common stock is $600,000. During the year, she receives a 5% stock dividend.

a.
What
is the amount of Inez’s gross income?
b.
What is Inez’s total basis for the stock?
c.
What is Inez’s basis per share?

116.Felix gives 100 shares of stock to his daughter, Monica.
The stock was acquired in 2001 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.

a.
Does
the receipt of the stock result in gross income to Monica?
b.
What is Monica’s basis in the stock?

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117.On September 18, 2010, Jerry
received land and a building from Ted as a gift. Ted had purchased the land and
building on March 5, 2007, and his adjusted basis and the fair market value at
the date of the gift were as follows:

Asset

Adjusted Basis

FMV

Land

$150,000

$200,000

Building

90,000

100,000

Ted paid gift tax on the transfer to Jerry of
$96,000.

a.
Determine Jerry’s adjusted basis and holding
period for the land and building.
b.
Assume instead that the FMV of the land was
$89,000 and the FMV of the building was $60,000. Determine Jerry’s adjusted
basis and holding period for the land and building.

118.Mel gives a parcel of land to his son, Scott.
He had purchased the land in 1997 for $140,000 and its fair market value on the
date of the gift is $125,000. No gift tax is paid. Scott subsequently sells the
land for $131,000.

a.
What
is Scott’s basis for the land?
b.
What is Scott’s realized and recognized gain or
loss from the sale of the land?

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119.Jessica inherits land from her
uncle. His adjusted basis in the land (purchased in November 2004) was $110,000
and it was included in his estate at a value of $225,000.

a.
Determine Jessica’s basis and holding period for
the land.
b.
Determine Jessica’s basis and holding period for
the land if it was included in her uncle’s estate at a value of $90,000.

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