CHAPTER 14–PROPERTY TRANSACTIONS

| November 9, 2018

140.Seth and Cheryl, husband and wife, own property jointly.
The property has an adjusted basis of $25,000 and a fair market value of
$30,000.

a.
Discuss the rules for the calculation of the
adjusted basis of the property to Seth if he inherits his wife’s share of the
property and Seth and Cheryl live in a community property state.
b.
If they live in a common law state?

141.Explain how the sale of investment property at a loss to a
brother is treated differently from a sale to a nephew.

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

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143.What is the easiest way for a
taxpayer who is going to sell property that has declined in value to avoid the
§ 267 loss disallowance provision?

144.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?

If the
bond sales resulted in the recognition of gain (rather than loss), would the
wash sale provisions prevent the gains from being recognized?

145.Mitchell owned an SUV that he had purchased two years ago
for $48,000 and which he transfers to his sole proprietorship. How is the sole
proprietorship’s basis for the SUV calculated? What additional information does
Mitchell need?

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146.Alice is terminally ill and
does not expect to live much longer. Pondering the consequences of her estate,
she decides how to allocate her property to her nieces. She makes a gift of
depreciated property (i.e., adjusted basis exceeds fair market value) to
Marsha, a gift of appreciated property (i.e., fair market value exceeds
adjusted basis) to Jan, and leaves appreciated property to Cindy in her will.
Each of the properties has the same fair market value. From an income tax
perspective, which niece is her favorite?

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

148.Identify two tax
planning techniques that can be used to avoid the wash sale disallowance of
loss.

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