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Exam 13: Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges-Part 1

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Question 71

Multiple Choice

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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?

A) $300,000.
B) $375,000.
C) $450,000.
D) $750,000.
E) None of the above.

F) D) and E)
G) A) and B)

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Question 72

True/False

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Reggie owns all the stock of Amethyst, Inc.(adjusted basis of $80,000).If he receives a distribution from Amethyst of $70,000 and corporate earnings and profits are $18,000, Reggie has a capital gain of $8,000 and an adjusted basis for his Amethyst stock of $0.

A) True
B) False

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Question 73

Multiple Choice

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On February 2, 2012, Karin purchases real estate for $375,000.The annual property taxes of $5,000 are payable on December 31.Realizing that she will pay the property taxes for the entire year, Karin remits $374,575 to the seller at closing.Karin's adjusted basis for the real estate is:

Which of the following is correct?

Alice owns land with an adjusted basis of $610,000, subject to a mortgage of $350,000.Real estate taxes are $9,000 per calendar year and are payable on December 31.On April 1, 2012, Alice sells her land subject to the mortgage for $650,000 in cash, a note for $600,000, and property with a fair market value of $120,000.What is the amount realized?

The amount received for a utility easement on land is included in the gross income of the taxpayer.

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

Jesse purchases land and an office building for his business for $200,000 with $50,000 being allocated to the land.During the first year, Jesse deducts cost recovery of $3,050.Jesse's adjusted basis for the building at the end of the first year is $146,950 ($150,000 - $3,050).

If a seller assumes the buyer's liability on the property acquired, the buyer's adjusted basis for the property is increased by the amount of the liability assumed.

Kitty, who is single, sells her principal residence, which she has owned and occupied for 8 years, for $375,000. The adjusted basis is $64,000, selling expenses are $22,000, and repairs to make the house more marketable are $7,000. Her recognized gain is $32,000.

Which of the following statements is correct?

Molly exchanges a small machine (adjusted basis of $85,000; fair market value of $78,000) used in her business and investment land (adjusted basis of $10,000; fair market value of $15,000) for a large machine (fair market value of $93,000) to be used in her business in a like-kind exchange.What is Molly's recognized gain or loss?

Abby exchanges 3,000 shares of Osprey, Inc., stock for 1,500 shares of Blue Heron, Inc., stock.Abby's adjusted basis for the Osprey stock is $270,000 and the fair market value of the Blue Heron stock is $300,000.Abby's recognized gain is $0 and her adjusted basis for the Blue Heron stock is $270,000.

Shari exchanges an office building in New Orleans (adjusted basis of $700,000) for an apartment building in Baton Rouge (fair market value of $900,000).In addition, she receives $100,000 of cash.Shari's recognized gain is $100,000 and her basis for the apartment building is $800,000 ($700,000 adjusted basis + $100,000 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.

Livestock of different sexes can qualify for like-kind exchange treatment if the livestock has been held for over one year.

Expenditures made for ordinary repairs and maintenance of property are not added to the original basis in the determination of the property's adjusted basis whereas capital expenditures are added to the original basis.

A realized loss whose recognition is postponed results in the temporary recovery of more than the taxpayer's cost or other basis.

Which of the following statements is incorrect for a § 1033 involuntary conversion?

Albert purchased a tract of land for $140,000 in 2009 when he heard that a new highway was going to be constructed through the property and that the land would soon be worth $200,000.Highway engineers surveyed the property and indicated that he would probably get $180,000.The highway project was abandoned in 2012 and the value of the land fell to $100,000.What is the amount of loss Albert can claim in 2012?