f97a - Page 1 of 8 ANSWER KEY University of Florida College...

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Page 1 of 8 ANSWER KEY University of Florida College of Law Final Examination Income Tax Fall Semester, 1997 Professor Willis
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Page 2 of 8 Question One TP has the following assets. Determine the basis and holding period for each. 1. Vacant land he purchased in 1970 for $10,000. It is now worth $150,000. 2. Vacant land he purchased in 1997 for $10,000. It is now worth $2,000. 3. Vacant land his father purchased in 1997 for $10,000. His father died in August and TP inherited the land. It was then worth $15,000. The estate’s personal representative did not elect an alternate valuation date. 4. Vacant land he purchased in 1990 for $10,000 cash and a purchase money promissory note for $25,000. He has paid all interest due on the note and $17,000 of principal. 5. Vacant land he purchased in 1990 for $10,000. It is now worth $20,000. Yesterday, he borrowed $15,000 from a bank, giving a mortgage on the land as security for the loan. He deposited the loan proceeds in a savings account. 6. Vacant land his wife purchased in 1997 for $10,000. It is now worth $2,000. Yesterday, she gave it to him pursuant to their divorce. 7. Vacant land his employer transferred to him on December 20, 1996, as a year-end bonus. The land cost the employer $10,000 and was worth $15,000 at the time of the transfer. It is now worth $17,000. 8. A gold watch he found in the street yesterday. He had it appraised for $12,000 and has decided to keep it. 9. A gold watch he stole from a jeweler yesterday. It had a price tag of $15,000 on it. 10. An apartment building he bought in 1990 for $500,000 [of which $100,000 was allocated to the land]. During 1994 he made improvements of $200,000 to the building. It has been fully leased to tenants since the purchase. Item Basis Holding period 1. $10,000 long term: 27 years 2. $10,000 short term: less than one year 3. $15,000 effectively long term per § 1223(11 ) Item Basis Holding period
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Page 3 of 8 4. $35,000 long term: 7 years 5. $10,000 long term: 7 years 6. $10,000 short term: 1 day 7. $15,000 short term: 355 days 8. $12,000 short term: 1 day 9. $15,000 short term: 1 day 10. Between $555,454.57 and 576,363.66 long term To answer regarding number 10, I would need to know three pieces of information: 1. During which month of 1990 was the property acquired? 2. During which month of 1994 were the improvement completed? 3. Why do you want to know basis today? 1. Whichever month it was acquired, I would take ½ month depreciation plus all the remaining months of that year. Hence, I would take a minimum of ½ month for 1990 and a maximum of 11 ½ months. 2. Whichever month the improvements were completed, I would take ½ month depreciation plus all the remaining months of that year for the $200,000 of improvements, which would be depreciated separately. Hence, I would take a minimum of ½ month for 1994 and a maximum of 11 ½ months.
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This note was uploaded on 12/28/2011 for the course TAX 4300 taught by Professor Staff during the Fall '11 term at University of Florida.

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f97a - Page 1 of 8 ANSWER KEY University of Florida College...

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