Chapter 14 HW Solutions

Chapter 14 HW Solutions - Chapter 14 HW Solutions 7 If the...

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Chapter 14 HW Solutions 7. If the buyer pays real property taxes that are treated as imposed on the seller, the seller’s amount realized and the buyer’s adjusted basis both are increased by such an amount. Conversely, if the seller pays real property taxes that are treated as imposed on the buyer, the seller’s amount realized and the buyer’s adjusted basis both are decreased by such an amount. p. 14-4 8. Under the first option, the basis for the land consists of the sum of the cash paid by Tad ($120,000) and the mortgage on the land ($80,000) which Tad would assume. The basis under the second option is the $200,000 paid by Tad. Therefore, Tad’s basis will be the same regardless of which option he selects. However, the first option will require a smaller current cash outflow. The same current cash outflow of $120,000 could be achieved under the second option if Tad were to place an $80,000 mortgage on the land immediately. However, this may result in additional closing costs. p. 14-4 10. a. One factor that could contribute to this result is that mortgages are granted based on the fair market value of the property rather than based on the taxpayer’s adjusted basis for the property. Another factor is that depreciation deductions in the early life of the asset may have exceeded the amortization of the mortgage principal. Also, it is possible that the property declined in value after the mortgage was granted. b.
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Chapter 14 HW Solutions - Chapter 14 HW Solutions 7 If the...

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