BUSA427_Chapter10.docx - Chapter 10 Ch 10 Question 23...

Chapter 10
Ch. 10: Question 23
Albert Armstrong’s basis in the building at the time of sale was $450,000. It can be
calculated as follows:
$570,000 + $60,000 + $40,000 + $150,000 + $50,000 = $870,000
$870,000 - $420,000 = $450,000 basis
Albert Armstrong’s realized gain on sale of the building is $350,000. His recognized gain
on sale of the building is also $350,000 since no additional information was given. It can
be calculated as follows:
$800,000 - $450,000 = $350,000
Ch. 10: Question 28
Gail’s basis in the land is $112,500. Her basis in the building is $450,000. Her basis in
each truck is $22,500 and $45,000. It can be calculated as follows:
Land: $125,000 $630,000 x ($125,000 / $700,000) = $112,500
Building: $500,000 $630,000 x ($500,000 / $700,000) = $450,000
Truck 1: $ 25,000 $630,000 x ($ 25,000 / $700,000) = $ 22,500
Truck 2: $ 50,000 $630,000 x ($ 50,000 / $700,000) = $ 45,000
$700,000 combined FMV
Ch. 10: Question 31
Naomi’s basis of preferred shares after the dividend is $4,444. Her basis of common
shares is $3,556. It can be calculated as follows:
FMV of Preferred Stock: 200 shares x $75 = $15,000
FMV of Common Stock: 200 shares x $60 = $12,000