AF 450 – Federal Taxation I
Dr. Julia M. Camp
Solutions to Suggested Problems
Chapter 5: I5-2, I5-5, I5-6, I5-13, I5-25, I5-33, I5-34, I5-35, I5-44, I5-48, I5-49, I5-61
Cost of the house
Cost of the room added to the house
Cost of built-in bookshelves
Basis for the house p. I:5-4.
David's holding period starts on October 22 of the current year (the day
after the date of the gift) if David uses the FMV at the date of the gift to determine his
His holding period starts on January 20, 1995, if he uses his grandfather's
pp. I:5-28 and I:5-29.
The value of the taxable estate would be $200,000 less and the estate tax is
reduced by electing to use the alternate valuation date.
Jim's basis for the property would be $200,000 higher, and he might have
a smaller gain or larger loss when he sells or exchanges the land.
The potential savings in estate tax is $74,000 (37% x $200,000).
property is subsequently sold at a gain, the tax savings will be $30,000 (15% x