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Fall 07 Tax III without answers

Fall 07 Tax III without answers - Fall 2007 Test III...

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Fall 2007, Test III, Multiple Choice Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 1. Carlton purchases land for $300,000. He incurs legal fees of $5,000 associated with the purchase. He sub- sequently incurs additional legal fees of $20,000 in having the land rezoned from agricultural to residential. He subdivides the land and installs streets and sewers at a cost of $600,000. What is Carlton’s basis for the land and the improvements? a. $300,000. b. $900,000. c. $905,000. d. $925,000. ____ 2. Sandra’s automobile, which is used exclusively in her trade or business, was damaged in an accident. The ad- justed basis prior to the accident was $11,000. The fair market value before the accident was $10,000 and the fair market value after the accident is $6,000. Insurance proceeds of $3,200 are received. What is Sandra’s ad- justed basis for the automobile after the casualty? ____ 3. Shontelle received a gift of income-producing property with an adjusted basis of $50,000 to the donor and fair market value of $40,000 on the date of gift. Gift tax of $6,000 was paid by the donor. Shontelle subsequently sold the property for $45,000. What is the recognized gain or loss? ____ 4. Taylor inherited 100 acres of land on the death of his father in 2007. A Federal estate tax return was filed and this land was valued at $15,000, its fair market value at the date of the father’s death. The father had origin- ally acquired the land in 1940 for $2,000 and prior to his death he had expended $1,000 on permanent im- provements. Determine Taylor’s holding period for the land. a. Will begin with the date his father acquired the property. b. Will automatically be long-term. c. Will begin with the date of his father’s death. d. Will begin with the date the property is distributed to him. ____ 5. Arthur owns a tract of undeveloped land (adjusted basis of $145,000). He sells the land to his son, Art, for $105,000, its fair market value. What is Arthur’s recognized gain or loss, and what is Art’s basis for the land?
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____ 6. Which of the following statements is correct? a. The receipt of boot in a § 1031 like-kind exchange can result in the recognition of gain. b. The receipt of boot in a § 1031 like-kind exchange can result in the recognition of loss. c. The giving of boot in a § 1031 like-kind exchange does often result in the recognition of gain. d. The giving of boot in a § 1031 like-kind exchange does often result in the recognition of a loss.
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