Ind. 2008 Chap.5DQs - Chapter I:5 Property Transactions -...

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Chapter I:5 Property Transactions - Capital Gains and Losses Discussion Questions I:5-1 It may be difficult to determine the fair market value (FMV) of the used building received by the investor. The problem is likely to be resolved by using the FMV of the property given (the publicly-traded stock) to measure the amount realized. p. I:5-3. I:5-2 Cost of the house $60,000 Cost of the room added to the house 10,000 Cost of built-in bookshelves 800 Basis for the house p. I:5-4. $70,800 I:5-3 Yes, sales tax paid or accrued in connection with the acquisition of property is included as part of the property's cost. p. I:5-5. I:5-4 Amount realized $8,000 Minus: basis (50 shares x $90)* (4,500 ) LTCG $3,500 *FIFO method is used. p. I:5-6. I:5-5 a. 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 basis. b. His holding period starts on January 20, 1995, if he uses his grandfather's basis. pp. I:5-28 and I:5-29. I:5-6 a. 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. b. 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. c. The potential savings in estate tax is $74,000 (37% x $200,000). If the property is subsequently sold at a gain, the tax savings will be $30,000 (15% x $200,000), thus the alternate valuation date should be elected. The holding period for an inherited asset is long- term. Another factor to consider is whether Jim plans to sell the property in the near future since the income tax savings would not occur until Jim sells or exchanges the property while the estate tax savings are realized currently. p. I:5-8. I:5-1
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I:5-7 $150 ($82,500/550 shares). pp. I:5-10 and I:5-11. I:5-8 Basis of stock Total number of Basis for each owned before ÷ shares owned after = share owned stock dividend stock dividend after dividend $38,880 divided by x = $18 x = 2,160 shares Total number of shares after stock dividend 2,160 Total number of shares before stock dividend 2,000 Increase in shares due to stock dividend 160 Percentage dividend distributed (160 divided by 2,000) = 8 % pp. I:5-10 and I:5-11. I:5-9
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This note was uploaded on 08/02/2009 for the course ACC /483 BASIC INT taught by Professor Babin during the Spring '09 term at University of Phoenix.

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Ind. 2008 Chap.5DQs - Chapter I:5 Property Transactions -...

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