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Exam 14: Property Transactions: Determination of Gain or Loss and Basis Considerations

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Question 61

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Nontaxable stock dividends result in no change to the total basis of the old and new stock,but the basis per share decreases.

A) True
B) False

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Question 62

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Taylor owns common stock in Taupe,Inc.,with an adjusted basis of $100,000.She receives a preferred stock dividend which is nontaxable.

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Question 63

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Annette purchased stock on March 1,2012,for $165,000.At December 31,2012,it was worth $171,000.She also purchased a bond on September 1,2012,for $20,000.At year end,it was worth $16,000.Determine Annette's realized and recognized gain or loss.

Purchased goodwill is assigned a basis equal to cost,and developed or self-created goodwill is assigned a basis equal to one-fifteenth of the amount expended.

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

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?

Andrew acquires 2,000 shares of Eagle Corporation stock for $100,000 on March 31,2005.On January 1,2012,he sells 125 shares for $5,000.On January 22,2012,he purchases 135 shares of Eagle Corporation stock for $6,075.When does Andrew's holding period begin for the 135 shares?

The holding period of nontaxable stock rights includes the holding period of the stock on which the rights were distributed.

Lois received nontaxable stock rights with a fair market value of $4,000.The fair market value of the stock on which the rights were received is $24,000 (cost $14,000).Assume the rights are exercised by paying $31,000 plus the rights.Discuss how to calculate the basis of the old stock and the basis of the new stock.

Over the past 20 years,Alfred has purchased 380 shares of Green,Inc.,common stock.His first purchase was in 1991 when he acquired 30 shares for $20 a share.In 1996,Alfred bought 150 shares at $10 a share.In 2011,Alfred acquired 200 shares at $50 a share.Alfred intends to sell 125 shares at $60 per share in the current year.If Alfred's objective is to minimize gain,what is his recognized gain?

Taylor inherited 100 acres of land on the death of his father in 2012.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 1966 for $112,000 and prior to his death he had expended $20,000 on permanent improvements.Determine Taylor's holding period for the land.

Robert and Diane,husband and wife,live in Pennsylvania,a common law state.They purchased land as joint tenants in 2008 for $300,000.In 2012,Diane dies and bequeaths her share of the land to Robert.The land has a fair market value of $450,000.What is Robert's adjusted basis for the land?

Maurice sells his personal use automobile at a realized loss.Under what circumstances can Maurice deduct the loss? What if the personal use asset was sold at a realized gain?

Stuart owns land with an adjusted basis of $190,000 and a fair market value of $500,000.If the property is going to be given to Stuart's nephew,Alex,it is preferable for the transfer to be by inheritance rather than by gift.

Define a bargain purchase of property and discuss the related tax consequences.

Felix gives 100 shares of stock to his daughter,Monica.The stock was acquired in 2003 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.

Bill is considering two options for selling land for which he has an adjusted basis of $80,000 and on which there is a mortgage of $75,000.Under the first option,Bill will sell the land for $170,000 with a stipulation in the sales contract that he liquidate the mortgage before the sale is complete.Under the second option,Bill will sell the land for $95,000 and the buyer will assume the mortgage.Calculate Bill's recognized gain under both options.

What effect does a deductible casualty loss have on the adjusted basis of property?

Gift property (disregarding any adjustment for gift tax paid by the donor) :

Noelle owns an automobile which she uses for personal use.Her adjusted basis is $45,000 (i.e.,the original cost) .The car is worth $22,000.Which of the following statements is correct?