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final test rev 1

final test rev 1 - An example of a basket purchase is...

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An example of a basket purchase is: Choose one answer. a. the purchase of real property with one or more item b. the purchase of land and a building for a single, lum c. two separate property purchases completed one rig d. both a and b. e. all of the above. A basket purchase is the purchase of real property with one or more items of personal property or the purchase of land and a building for a single, lump-sum amount. Correct Marks for this submission: 2/2. Question 2 Marks: 2 Gains and losses resulting from mere appreciation or decline in value are unrealized gains and losses, and are not included in the calculation of taxable income. Answer: True False Gains and losses from appreciation or decline in value are not realized gains and losses. Correct Marks for this submission: 2/2. Question 3 Marks: 2 In 2011, Bob Brown's aunt Barbara gave him a house. At the time of the gift, the house had a fair market value of \$193,000, the taxable gift was \$180,000, and his aunt's adjusted basis was \$73,000. His aunt paid a gift tax of \$30,000 on the house. What is Bob's basis in the house for purposes of determining gain? Choose one answer. a. \$73,000 b. \$93,000 c. \$180,000 d. \$193,000

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Bob would add \$20,000 of the gift tax on to the aunt's basis of \$73,000 to get \$93,000. The \$20,000 is computed by multiplying the \$30,000 gift tax by a fraction the numerator of which is the \$120,000 appreciation and the denominator is the \$180,000 taxable gift. * This question has been adapted from the IRS Examinations. Correct Marks for this submission: 2/2. Question 4 Marks: 2 To determine the initial basis of purchased property, cost is used unless it is a bargain transaction in which case its fair market value is used. Answer: TrueFalse Incorrect Marks for this submission: 0/2. Question 5 Marks: 2 Leonard London sold a building used in his business to Michelle Martinson. He had purchased the property several years previously for \$340,000, \$300,000 of which was the mortgage. Major improvements in the amount of \$240,000 had been made. At the
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