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Chapter 6 HW Solutions

Chapter 6 HW Solutions - 1 Basis Solution Lindas basis is...

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1. Basis Solution: Linda’s basis is $30,000, the fair market value at the date of death. 9. Depreciation/Amortization Solution: a. No. Land is not eligible for cost recovery as it is not a wasting asset. b. No. Using the standard mileage rate prevents the taxpayer from taking depreciation deductions. c. Yes. These are intangible assets subject to amortization. 10. Section 179 Expensing Solution : The allowable expensing amount ($250,000) must be reduced on a dollar-for-dollar basis when total eligible investments exceed $800,000. A business is not eligible to expense any of its assets when it has acquired more than $1,050,000 ($800,000 + $250,000) of eligible assets for the year. It is far more likely that a large business will exceed this investment limit than a small business. 17. Basis for Depreciation Solution: $125,000. Anne uses the lower of her basis or fair market value at the date the condo is converted from personal to rental property. 18. Gift Basis Solution: $19,091. David uses Ted’s basis increased by a portion of the gift tax related to the appreciation on the gift determined as follows: $2,000 gift tax x [($24,000 - $18,000)/$11,000] = $1,091 gift tax related to appreciation. $18,000 carryover basis from donor + $1,091 gift tax = $19,091.
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