necklace had been purchased by the friend for $25,000. The friend did not pay any gift tax. Marcia ran into some fi nancial dif fi culty and sold the necklace for $23,000. Marcia must recognize a gain of $1,000. 500 shares of the Yellow Brick Construction Company were sold for $10,000, its fair market value, by 35. Esmeralda Emerson to her sister, Topaz, for $8,500. Esmeralda has a nondeductible loss of $1,500.
539 Testbank ©2010 CCH. All Rights Reserved. Chapter 10 MULTIPLE CHOICE QUESTIONS—CHAPTER 10 *Questions 36, 38–44, 52, 53, and 60–62 have been adapted from the IRS Examinations.Leonard Lambert’s commercial building, which had an adjusted basis of $500,000, was partially destroyed 36. by fire. The fair market value was $800,000 just before the fire and $600,000 immediately after. Leonard received $150,000 insurance proceeds and deducted a $50,000 casualty loss. What is Leonard’s basis in the building before any repairs are made? 37. 2010, for $4,000. On March 29, 2010, Lem purchases 50 shares of Redwood Corporation common stock for $2,500. Lem’s recognized loss on the sale is: 38. over a five-year period. He should have claimed $50,000 depreciation. What was the adjusted basis when sold? Which of the following items is not a reduction to the basis of an asset? 39. Depreciation a. Assessments for maintenance of sidewalks b. Cash rebate from manufacturer c. Casualty losses d. In 2010, Bob Brown’s aunt Barbara gave him a house. At the time of the gift, the house had a fair market 40. 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? d. In May 2010, Automatic, Inc. sold land with a basis to Automatic of $100,000, to Jack Jones, its 60% 41. shareholder, for $80,000. In July, Jack sold the land to an unrelated party for $110,000. What is the amount of Jack’s recognized gain?
540 CCH Federal Taxation—Basic Principles Chapter 10 © 2010 CCH. All Rights Reserved. Brian Brewster sold property to a buyer who paid him $400,000 cash and assumed an existing mortgage 42. of $150,000. The property had cost $250,000 and he had made improvements of $50,000. Depreciation of $100,000 has been claimed and selling expenses were $20,000. What is the amount of gain?
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