Chapter 10 assigned homework

Chapter 10 assigned homework - Basis and Gain or Loss: Sale...

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Basis and Gain or Loss: Sale of Depreciable Property 21. The adjusted basis of the building at the time of sale is $450,000 and the realized and recognized gain is $350,000, computed as follows: Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $570,000 Air conditioning system . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,000 Installation of unmovable bookcases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,000 Electrical wiring system . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,000 Partitioning. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000 $870,000 Less: Capital recovery (depreciation) . . . . . . . . . . . . . . . . . . . . . . . . . . . 420,000 Adjusted basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$450,000 Selling price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $800,000 Less: Adjusted basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 450,000 Gain realized and recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $350,000 The $7,500 painting of the building, the $3,000 carpet cleaning, and the $5,000 repairs on the fence are not capitalizable to the building. They are repair and maintenance expenses. Adjusted Basis: Sale of Depreciable Property 22. $725,000, the cost of $975,000 less depreciation allowed or allowable of $250,000. Rex must reduce his basis by the greater of the depreciation allowed or allowable. In this case, $25,000 depreciation allowed or allowable for 10 years (i.e., $250,000) must be deducted from $975,000. Basis: Sale of Stock 24. Basis is $750, the fair market value of the stock. Taxable income is $750. Gain or Loss: Sale of Stock and Personal-Use Assets 25. a. Recognized gain of $2,000. b. Recognized gain of $2,000 on sale of personal-use assets. c. No loss is recognized on sale of personal-use assets. Allocation of Basis: Depreciable and Nondepreciable Property 26. The basis of the land is $112,500, the building $450,000, and the truck $22,500 and $45,000 as follows: $125,000 Land $700,000 × $630,000 = $112,500
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$500,000 Building $700,000 × $630,000 = $450,000 $25,000 Truck I $700,000 × $630,000 = $ 22,500 Truck II $50,000 × $630,000 = $ 45,000 $700,000 Basis and Gain or Loss: Stock Dividends 27. With the 25 percent stock dividend, 30 shares were received, which brings the total number of shares up to 150. Basis after the dividend: $1,800/150 = $12.00 per share. (This
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Chapter 10 assigned homework - Basis and Gain or Loss: Sale...

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