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Chapter 14 Class Question 2011

Chapter 14 Class Question 2011 - Bob Ryan DePaul University...

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Bob Ryan DePaul University Class Questions Accounting 380 Tax Treatment of Individuals and Property Transactions 2011 Chapter 14 – Property Transactions: Gain or Loss and Basis Considerations True/False 2. Molanda sells a parcel of land for $18,000 in cash and the buyer assumes Molanda’s mortgage of $12,000 on the land. Molanda’s amount realized is $30,000. 6. If a seller assumes the buyer’s liability on the property acquired, the buyer’s adjusted basis for the property is increased by the amount of the liability assumed. 8. Deductions taken for depreciation or cost recovery on business or income-producing property reduce the adjusted basis of the property. 14. The amount of a corporate distribution qualifying for capital recovery treatment which exceeds the recipient’s stock basis is treated as an ordinary gain. 18. A realized gain on the sale or exchange of a personal use asset is recognized, but a realized loss on the sale, exchange, or condemnation of a personal use asset is not recognized. 22. When a taxpayer has purchased several lots of stock on different dates at different purchase prices and cannot identify the lot of stock that is being sold, he may choose which lot of stock is deemed to be sold. 28. This year, Fran receives a birthday gift of stock worth $75,000 from her aunt. The aunt has owned the stock (adjusted basis $50,000) for 10 years and pays gift tax of $27,000 on the transfer. Fran’s basis in the stock is $75,000—the lesser of $77,000 ($50,000 + $27,000) or $75,000. 32. The basis of property received by inheritance is a carryover basis. 35. If the alternate valuation date is elected by the executor of the estate, the basis of all of the property included in the decedent’s estate becomes the fair market value 6 months after the decedent’s death. 40. A related party purchaser includes in the basis of the property acquired the seller’s disallowed loss. 1
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48. The taxpayer owns stock with an adjusted basis of $15,000 and a fair market value of $8,000. If the stock or cash is going to be given to her niece, it is preferable for the taxpayer to sell the stock and give the $8,000 of cash to her niece. The same preference would exist if the recipient were a qualified charitable organization.
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