With a selling price of 850000 there is a 300000

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With a selling price of $850,000, there is a $300,000 realized gain. However, as a single taxpayer, Tina can exclude $250,000. She can count the time they owned it when they were married. Therefore, she must recognize $50,000 gain. Sale of Residence: Divorced Taxpayers 25. a. Thomas can exclude the $120,000 gain since he can count the time that Tonya owned the residence which makes the ownership and use more than two years. b. Tonya can exclude the $120,000 gain since she can count the time that Thomas used the residence as part of the divorce agreement. Sale of Residence: Incapacitated Taxpayers 26. Arnold can exclude the $85,000 gain ($245,000 less $160,000) because he has used the residence at least one year during the preceding five years. Sale of Residence: Involuntary Conversion 27. a. Oscar does not recognize any of the $230,000 realized gain on the involuntary conversion of his home by the tornado because it is less than the $250,000 exclusion allowed for a single individual. b. Oscar has a realized gain of $355,000 ($525,000 less $170,000). He may exclude $250,000 and would have to recognize $105,000 gain. If, however, he purchased a home for $275,000 or more, he could defer the remaining $105,000 of realized gain. The $525,000 would be reduced by the $250,000 gain excluded leaving $275,000 of proceeds to be used when applying the gain deferral provision under the involuntary conversion rules of Code Sec. 1033.
15 Instructor’s Manual © 2016 CCH Incorporated and its affiliates. All rights reserved. Chapter 11 Sale of Residence: Pro-ration of Exclusion 28. a. Carl can exclude $156,250 ($250,000 times 15 months divided by 24 months = $156,250). He must recognize $118,750, the difference between the realized gain of $275,000 ($440,000 less $165,000) and the exclusion of $156,250. b. Carl would still be able to exclude up to $156,250, which is more than the realized gain of $135,000. Therefore, he does not need to recognize any gain. Like-Kind Exchanges: Types 29. (a), (b), and (e) are like-kind exchanges. (c) is not a like-kind exchange because it is personality for realty. (d) is not a like-kind exchange because inventory does not qualify under the like-kind provisions. Sale, Exchange, and Casualty 30. a. If Lewis sells the yacht for $220,000, there is a $90,000 nondeductible personal loss ($220,000 - $310,000). b. If Lewis exchanges the yacht for another yacht worth $220,000, there is a $90,000 realized loss, but no recognized loss because it is a personal use asset. c. If the yacht burns and is completely destroyed, and he receives $200,000 proceeds, he has a personal casualty loss of $20,000 ($200,000 less $220,000, the lesser of the decline in the fair market value or the adjusted basis). This $20,000 is reduced by $100 and by 10% of adjusted gross income to give $4,900. Like-Kind Exchanges: Basis and Gain or Loss 31. a. Sheila's realized and recognized gain is as follows: Fair market value of property received $40,000 Plus: cash received 10,000 Total fair market value received $50,000 Less: adjusted basis 25,000 Equals: Realized Gain $25,000 Recognized Gain $10,000 (to the extent of the cash received) The basis in the new property is as follows: Method 1: Basis of old property $25,000 Plus: gain recognized 10,000 Less: cash received 10,000 Basis in new property $25,000 Method 2: Fair market value of the like-kind property $40,000
16 CCH Federal Taxation Comprehensive Topics © 2016 CCH Incorporated and its affiliates. All rights reserved.

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