Chapter 7 Homework (1).pdf - Chapter 7 Homework Problems 1...

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Chapter 7 Homework Problems 1. Mary purchased a car for $25,000 in 2010. The car was used solely for personal use (not depreciable). While she owned the car, Mary paid $3,000 to have the car maintained (oil changes, tune-ups, etc.). In 2017, Mary sold the car for $5,000. What is the amount of Mary’s recognized gain or loss? 2. Bob owned equipment (FMV $50,000) that he used in his business. The equipment was subject to a $20,000 loan. Bob purchased the equipment in 2015 for $100,000. While he owned the equipment, Bob took depreciation deductions of $52,000. Bob sold the equipment in 2017 for $30,000, and the buyer assumed Bob’s loan of $20,000 on the equipment. Bob’s selling expenses were $500. What is the amount of Bob’s recognized gain or loss? Question 3 – 6 use the following facts: Eli inherited stock in 2015 from his father. Eli’s father’s AB was $100,000 at the time of death, and the FMV of the stock on the date of death was $750,000 (no alternate valuation date was used). In 2017, Eli sold the stock to his sister, Sara. 3. What is Eli’s recognized gain or loss if he sold the stock to Sara for $800,000? 4. What is Eli’s recognized gain or loss if he sold the stock to Sara for $700,000? Note: make sure you understand how Eli could have recognized the loss on the sale of the stock 5. What is Sara’s recognized gain or loss if Sara purchased the stock from Eli for $700,000 and later sold the stock for $900,000? Note: understand what would happen to Eli’s loss if he Sara sold the stock for a loss, not a gain 6. Instead of Eli inheriting the stock, Eli’s father gifted the stock to Eli in 2014 while the father was still alive. At the time of the gift, the stock’s FMV was $750,000, and Eli’s father’s AB was $100,000. No gift tax was paid. In 2017, Eli sold the stock to Sara for $800,000. What is Eli’s recognized gain or loss?
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