Practice Exam 2 Solutions - 1 For each of the following...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
1. For each of the following transactions, identify how much gain the taxpayer will recognize and the taxpayer’s basis in the new property.a. Maude exchanges computer equipment with a basis of $25,000 and a FMV of $45,000, for computer equipment with a FMV of $37,000 and a motorcycle with a FMV of $8,000. Maude’s Recognized Gain _____ $8,000 (motorcycle is boot property) Maude’s basis in new computer equipment ___ $25,000 (25,000 + 8,000 – 8,000) Maude’s basis in motorcycle _______ $8,000 (FMV) b.Cane Corporation’s warehouse is destroyed by a hurricane in September, 2009, when its basis is $130,000, and its FMV is $180,000. The insurance company reimburses Cane $180,000. In December, 2009, Cane Corporation purchases a new warehouse for $140,000. Cane’s Recognized Gain _______ $40,000 (the unreinvested proceeds) Cane’s Basis in new warehouse ____$130,000 2. White Corporation’s first disposition of a Section 1231 Asset occurred in 2005. Fill in the table below to indicate the character of White’s Net 1231 Gain/(losses) for the period 2005- 2009. Year Sec 1231 Gains Sec 1231 Losses Ordinary Income (loss) Capital Gain (loss) 2005 $10,000 $8,000 $2,000 2006 $10,000 $15,000 ($5,000) 2007 $6,000 $5,000 $1,000 2008 $9,000 $3,000 $4,000 $2,000 2009 $2,000 $8,000 ($6,000) 3. Taxpayer exchanges an apartment building with an adjusted basis of $47,000 and a FMV of $55,000, and boot (Green, Inc stock) with an adjusted basis of $9,000 and a FMV of $6,000 for a rental house with a FMV of $61,000 in a like-kind exchange. What is the recognized gain or loss and what is the taxpayer’s basis in the rental house? Taxpayer has a realized gain of $8,000 on apartment building. Zero is recognized. Taxpayer has a realized and recognized a loss on the boot property of $3,000. Basis in rental house = 47000 + 9,000 – 3,000 = $53,000. 4. Melody gives her niece, Joy, a machine to be used in her business with a FMV of $8,500 and an adjusted basis in Melody’s hands of $9,500. What is Joy’s basis for depreciation?
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern