CHAPTER 14–PROPERTY TRANSACTIONS

| November 9, 2018

120.Elbert gives stock worth $28,000 (no gift tax resulted) to
his friend, Jeff, on June 8, 2010. Elbert purchased the stock on September 1,
2003, and his adjusted basis is $22,000. Jeff dies on December 8, 2011, and
bequeaths the stock to Elbert. At that date, the fair market value of the stock
is $31,000.

a.
What
is Jeff’s basis and holding period for the stock?
b.
What is Elbert’s basis and holding period for the
stock?

121.Ed and Cheryl have been married for 27 years.
They own land jointly with a basis of $140,000. Ed dies in 2010, when the fair
market value of the land is $220,000. Under the joint ownership arrangement,
the land passed to Cheryl.

a.
If
Ed and Cheryl reside in a community property state, what is Cheryl’s basis in
the land?
b.
If Ed and Cheryl reside in a common law state,
what is Cheryl’s basis in the land?

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122.On January 15 of the current
taxable year, Merle sold stock with a cost of $40,000 to his brother Ned for
$25,000, its fair market value. On June 21, Ned sold the stock to a friend for
$26,000.

a.
What are the tax consequences to Merle and Ned?
b.
Would Ned recognize any gain if he sold the stock
for $41,000?

123.Vicki sells a parcel of land to her son, Dan, for $40,000.
Vicki’s adjusted basis is $45,000. Two years later Dan gives the land to his
fiancée, Karen. At that date, the land is worth $47,000. No gift tax is paid.
Since Dan is going to be stationed in the U.S. Army in Germany for 3 years,
they do not plan on being married until his tour is completed. Six months after
receiving the land, Karen sells it for $48,000. Calculate Karen’s realized and
recognized gain or loss.

124.Justin owns 1,000 shares of Oriole Corporation common
stock (adjusted basis of $9,800). On April 27, 2010, he sells 300 shares for
$2,800, while on May 5, 2010, he purchases 200 shares for $2,500.

a.
What
is Justin’s recognized gain or loss resulting from these transactions?
b.
What is Justin’s basis for the stock acquired on
May 5, 2010?
c.
Could Justin have obtained different tax
consequences in a. and b. if he had sold the 300 shares on December 27, 2010,
and purchased the 200 shares on January 5, 2011?

23

125.Laura transfers her personal
use automobile to her business. The car’s adjusted basis is $20,000 and the
fair market value is $15,000. Determine the adjusted basis of the car to
Laura’s sole proprietorship including the basis for cost recovery.

126.What is the general formula for calculating the amount
realized on the sale or other disposition of property?

127.Discuss the effect of a liability assumption on the
seller’s amount realized and the buyer’s adjusted basis.

128.What is the general
formula for calculating the adjusted basis of property?

24

129.What is the difference between
the depreciation (or cost recovery) allowed and the depreciation (or cost
recovery) allowable and what effect does each have on the adjusted basis of
property?

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