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

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Question 71

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Etta received nontaxable stock rights on October 3,2012.She allocated $12,000 of the $30,000 basis for the associated stock to the stock rights.The stock rights are exercised on November 8,2012.The exercise price for the stock is $42,000.What is Etta's basis for the acquired stock?

A) $12,000.
B) $42,000.
C) $54,000.
D) $72,000.
E) None of the above.

F) D) and E)
G) C) and E)

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Question 72

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If a taxpayer purchases taxable bonds at a premium,the amortization of the premium is elective.However,if a taxpayer purchases tax-exempt bonds at a premium,the amortization of the premium is mandatory.Explain this difference in the treatment.

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If mandatory amortization were not requi...

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Question 73

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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.

Lynn transfers her personal use automobile to her business (a sole proprietorship).The car's adjusted basis is $35,000 and the fair market value is $12,000.No cost recovery had been deducted by Lynn,since she held the car for personal use.Determine the adjusted basis of the car to Lynn's sole proprietorship including the basis for cost recovery.

Capital recoveries include:

The amount of a corporate distribution qualifying for capital recovery treatment which exceeds the recipient's stock basis is treated as an ordinary gain.

How is the donee's basis calculated for the gift of appreciated property for a gift made before 1977? Assume the donor pays gift tax.

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?

Boyd acquired tax-exempt bonds for $430,000 in December 2012.The bonds,which mature in December 2017,have a maturity value of $400,000.Boyd does not make any elections regarding the amortization of the bond premium.Determine the tax consequences to Boyd when he redeems the bonds in December 2017.

A donee receives depreciable property worth $85,000 (basis to donor of $150,000)with no gift tax being paid on the transfer.The donee's basis for depreciation purposes is $85,000.

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

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.

If losses are disallowed in a related party transaction,the holding period for the buyer includes the holding period of the seller.

Faith inherits an undivided interest in a parcel of land from her father on February 15,2012.Her father purchased the land on August 25,1985 and his basis for the land was $325,000.The fair market value of the land is $12,500,000 on the date of her father's death and is $11,000,000 six months later.The executor elects the alternate valuation date.Faith has nine brothers and sisters and each inherited a one-tenth interest.

What is a deathbed gift and what tax consequences apply?

If the alternate valuation date is elected by the executor of the estate,the basis of all of the property included in the decedent's estate becomes the fair market value 6 months after the decedent's death.

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

The basis of property acquired in a bargain purchase is the cost of the asset.The bargain amount (fair market value - cost)is recognized when the asset is sold.

The basis of property acquired in a wash sale is its cost plus the loss recognized on the wash sale.

The holding period for property acquired by gift is automatically long term.