Homework Set 5 Solution - Tax 4001 Fall 2010 Homework Set#5...

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Tax 4001 Fall 2010 Homework Set #5 Solution PAGE 1 # 1 a) Amount Realized $37,500 Basis (45,000) Real Loss (7,500) Recognized Loss $0 because personal use asset b) Same as (a). Like-kind exchange rules do not apply to personal-use assets #2 a. amt realized $65,000 "loss" basis 76,000 Recognized Loss (11,000) b. #3 a. $225,000 b. $200,000 (note: only the building can be depreciated) c. $225,000 Basis for the gain is adjusted basis d. She would be better off to sell the house and buy another one. Because the house is her personal residence, she could exclude the gain on sale. Then she would be able to depreciate the new house at a higher basis #4 a. Amt. Realized $265,000 Adj Basis 175,000 Real Gain 90,000 b. Recoginzed Gain is $65,000 which is the less of realized gain or boot received. c. Adjusted basis of Land $175,000 Gain Recognized 65,000 Boot (65,000) Adj Basis of Building 175,000 . c)Her recognized loss is $0. Since the form of the transaction is a theft, the recognized loss is the lesser of the adjusted basis or the fair market value of the asset, reduced by the insurance proceeds that she received (see Chapter 6). Therefore, the opportunity for the theft loss deduction on personal use property is not present in this
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