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127A-Prac-fin-ans-F07 - ANSWERS TO 127A PRACTICE FINAL FALL...

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ANSWERS TO 127A PRACTICE FINAL – FALL, 2007 1. B - Rental Real Estate is Sec. 1231 property and not a capital asset. As such he can fully deduct the loss. 2. A - Basis = Value at death or AVD ( here it is the AVD of $ 450K 6 mos. hence). So $ 550 – 450 = $ 100K; all inherited property is considered “long term” 3. B - $ 50,000 cost + $ 5,000 porch - $ 5,000 depreciation = $ 50,000 ( repairs N/A) 4. B / 2004 : 5 – 2 = 3K Basis, 1 – 3 = (2K) loss; 2005 : 120 – 30 = 90, 80 – 90 = (10K) loss 5. A / 2005 : 25 – 10 = 15K, 10 – 15 (5K) loss---Lookback Losses (LB) total $ 17,000 ( treated as ordinary ) 6. B \ 03 & 05 assets are 1245; 04 asset is 1250 ( not Reagan years ); 06 asset is 1250 ( residential real estate). 7. A \ 100 – 70 = 30K Basis; 280 – 30 = 250K Gain; 17 (LB) + 10 (Add. Dep) = 27 is ordinary, 60 is \ Unrecaptured 1250 gain ( taxed at 25% ) and remaining $ 163K is 1231 gain taxed at 20%. 8. A - Boot = $ 3K Mort. + $ 2K cash which is < Realized gain ($ 30 FMV + 2 cash + 3 debt relief = 35 – 25 basis = $ 10K realized gain), so recognized gain is $ 5K; Basis of Prop. Acquired = 25 – 5 + 5 = $ 25K 9. A - Total Capital Losses = $ 6K - take $ 3K as ordinary deduction (from ST loss first) & CF $ 3K ( LT Loss) 10. B - 1245: 9 – 2 = 7K gain; 6K dep. is recaptured as ordinary; remaining $ 1K is a 1231 gain (15%) 11. C - Amt. Realized (35 cash + 25 assumed mort. – 3.6 commissions) – 90 basis = (33,600) loss 12. A - Gloria got no boot, entire gain is deferred (not recognized); it is David that got $ 100K boot 13. A - 100 – 50 = 50 gain (defer only if all insurance $$ reinvested); reinvested only 78, so 100 – 78 = 22 is recognized gain & 28 is deferred gain; Basis of new prop. = 78 (cost) – 28 (deferred gain) = $ 50,000 14.
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