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Ch 14 Extra Problems

# Ch 14 Extra Problems - 30 a Original basis of land Original...

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30. a. Original basis of land \$ 50,000 Original basis of house 200,000 Less: Depreciation (30,900) Adjusted basis of house and land \$219,100 Original basis of tennis court \$ 5,000 Less: Depreciation (1,300) Adjusted basis of tennis court \$ 3,700 Amount realized \$400,000 Less: Adjusted basis (\$219,100 + \$3,700) (222,800) Realized gain \$177,200 b. Amount realized [\$400,000 (cash) + \$75,000 (mortgage)] \$475,000 Less: Adjusted basis (222,800) Realized gain \$252,200 c. Same answer as in part b. above. pp. 14-3 to 14-5 34. a. The \$50,000 distribution is labeled a return of capital because Dove has no earnings and profits. Butch reduces the basis of his stock by \$50,000 to \$20,000 (\$70,000 adjusted basis – \$50,000 return of capital distribution). b. As in a., the \$140,000 distribution is treated as a return of capital because Dove has no earnings and profits. Butch has a capital gain calculated as follows: Amount realized \$140,000 Less: Adjusted basis (70,000) Realized gain \$ 70,000 Recognized gain \$ 70,000 The basis for his stock is reduced to \$0. c. Since the \$50,000 distribution is a taxable dividend, Butch’s adjusted basis for his Dove stock remains at \$70,000.

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