CHAPTER_13_PART_2--PROPERTY

CHAPTER_13_PART_2-P - CHAPTER 13 PART 2-PROPERTY TRANSACTIONS DETERMINATION OF GAIN OR LOSS BASIS CONSIDERATIONS AND NONTAXABLE EXCHANGES CHAPTER

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Unformatted text preview: CHAPTER 13 PART 2--PROPERTY TRANSACTIONS: DETERMINATION OF GAIN OR LOSS, BASIS CONSIDERATIONS, AND NONTAXABLE EXCHANGES CHAPTER 13 PART 2--PROPERTY TRANSACTIONS: DETERMINATION OF GAIN OR LOSS, BASIS CONSIDERATIONS, AND NONTAXABLE EXCHANGES 1. Louis sold his farm during the current taxable year. At the date of the sale, the farm had an adjusted basis of $212,000 and was encumbered by a mortgage of $190,000. The buyer paid him $110,000 in cash, agreed to take the title subject to the $190,000 mortgage, and agreed to pay him $80,000 with interest at 9 percent one year from the date of sale. How much is Louis’ recognized gain on the sale? 2. Albert is considering two options for selling land for which he has an adjusted basis of $70,000 and on which there is a mortgage of $100,000. Under the first option, Albert will sell the land for $150,000 with a stipulation in the sales contract that he liquidate the mortgage before the sale is complete. Under the second option, Albert will sell the land for $50,000 and the buyer will assume the mortgage. Calculate Albert’s recognized gain under both options. 3. Annette purchased stock on March 1, 2010, for $32,000. At December 31, 2010, it was worth $29,000. She also purchased a bond on September 1, 2010, for $9,000. At year end, it was worth $12,000. Determine Annette’s realized and recognized gain or loss. 4. Nigel purchased a blending machine for $125,000 for use in his business. As to the machine, he has deducted MACRS cost recovery of $31,024, maintenance costs of $5,200, and repair costs of $4,000. Calculate Nigel’s adjusted basis for the machine. 5. Amanda uses a delivery van in her business. The adjusted basis is $21,000, and the fair market value is $18,000. The delivery van is stolen and Amanda receives insurance proceeds of $18,000. Determine Amanda’s realized and recognized gain or loss. 6. Renee purchases taxable bonds with a face value of $200,000 for $212,000. The annual interest paid on the bonds is $10,000. Assume Renee elects to amortize the bond premium. The total premium amortization for the first year is $1,600. a. What is Renee’s interest income for the first year? b. What is Renee’s interest deduction for the first year? c. What is Renee’s adjusted basis for the bonds at the end of the first year? 7. Walter acquired tax-exempt bonds for $330,000 in December 2010. The bonds, which mature in December 2015, have a maturity value of $300,000. Walter does not make any elections regarding the amortization of the bond premium. Determine the tax consequences to Walter when he redeems the bonds in December 2015. 8. Misty owns stock in Violet, Inc., for which her adjusted basis is $75,000. She receives a cash distribution of $52,000 from Violet....
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This note was uploaded on 07/10/2011 for the course ECON 1001 taught by Professor Cock during the Spring '11 term at Virginia Tech.

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CHAPTER_13_PART_2-P - CHAPTER 13 PART 2-PROPERTY TRANSACTIONS DETERMINATION OF GAIN OR LOSS BASIS CONSIDERATIONS AND NONTAXABLE EXCHANGES CHAPTER

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