Federal income taxation assignment

| August 14, 2017

1.Brittany started a law practice as a sole proprietor. She owned a computer, printer,
desk and file cabinet she purchased during law schools (several years ago) that
she is planning to use in her business.

What is the Brittany’s
initial basis for each asset, given the following information?
What is Brittany’s basis for
computing depreciation for each asset, given the following information?

Asset

Purchase Price

FMV at time Converted to Business Use

Computer

$ 2,500

$ 800

Printer

300

150

Desk

1,200

1,000

File Cabinet

200

225

2.ABC Company purchases all the assets of John’s Saw Shop. Details on basisand fair market values of John’s Saw Shop’s assets are as follows:                                Adjusted             Fair MarketAsset                           Basis                    ValueInventory                  $ 10,000             $ 27,000Machinery & Equipment   2,000               12,000Land                             8,000                15,000Building                       20,000                 6,000a. What is ABC’s basis in the assets purchased if ABC pays $40,000 for them?b. What is ABC’s basis in the assets purchased if ABC pays $70,000 for them?c. What is ABC’s basis if John’s Saw Shop is a corporation and ABC purchasesall John’s stock for $60,000?3.Jesse’s grandfather dies on April 13 of the current year. Jesse inherits thefollowing property:                                            FMV               FMVProperty           Basis            April 13          Oct. 13Land             $ 5,000         $ 20,000        $ 13,000Stock              14,000           10,000           12,000Watch                50                500                500a. What is Jesse’s basis in the inherited property?b. What is Jesse’s basis in the property if the executor of the estate elects thealternate valuation date?c. Assume that the executor elects the alternate valuation date and distributestitle to the land to Jesse on June 23 of the current year, when the fair marketvalue of the land is $17,000. What is Jesse’s basis in her inherited property?d. Assume that the executor elects the alternate valuation date and distributes theproperty to Jesse on December 2 of the current year, when the fair marketvalues are $15,000 for the land, $11,500 for the stock, and $500 for the watch.What is Jesse’s basis in her inherited property?

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