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Problem 5-A

# Problem 5-A - property Basis is \$4,000 the donor’s basis...

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Problem Set #5, with answers 1. Chris inherits stock when his Uncle Boris dies. Boris had paid \$40,000 for the stock back in 1998, and it was worth \$75,000 at his death on 4/18/2009. It was worth \$68,000 on 10/18/2009. It was worth \$69,000 when it was distributed by the estate to Chris. (a) If the alternate valuation election is not made, what's Chris's basis? (b) If the election is made, what's Chris's basis if it's distributed on 7/15/2009? (c) If the election is made, what's Chris's basis if it's distributed on 12/4/2009? (b) \$69,000, date at distribution because it was distributed before the 6 month date. (c) \$68,000, the value at the 6-month date because it was distributed after 6 months and so was still in the estate at that date. 2. Myrna buys stock for \$4,000 and gives it to her friend Maddy as a gift when it's worth \$7,500. How much gain or loss will Maddy have if she sells it for \$3,000? for \$9,000? for \$6,000? (Note: this is not "loss"
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Unformatted text preview: property.) Basis is \$4,000, the donor’s basis for all purposes (this is not loss property) , so a sale for \$3,000 yields a \$1,000 loss, a sale for \$9,000 yields a \$5,000 gain and a sale for \$6,000 yields a \$2,000 gain. 3. Alice buys stock for \$9,000 and gives it to her friend Millie as a gift when it's worth \$7,500. How much gain or loss will Millie have if she sells it for \$6,000? for \$10,000? for \$8,500? (Note: this is "loss" property.) On loss property, the basis is only determined when the item is sold. It may be either Alice’s cost \$9,000, or its (lower) value at the time of the gift (\$7,500). If it’s sold “low” for \$6,000, the basis is the lower amount, \$7,500, so the loss is \$1,500. If it’s sold “high, for \$10,000, the basis is the higher amount \$9,000, so the gain is \$1,000. If it’s sold in between the two numbers, for \$8,000, there is no gain and no loss....
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