Since the value of the rights is only 10 percent of the value of the stock

Since the value of the rights is only 10 percent of

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(c.) Since the value of the rights is only 10 percent of the value of the stock, nothing needs to be allocated to the rights. All of the $1,100 in sales proceeds is long-term capital gain. If the taxpayer made the election to allocate an amount to the rights, then $545 would be allocated to the rights as follows: $1,250 × $6,000 = $545$12,500 + $1,250(a.) Betty has $1,800 income (300 × $6). The basis in the rights is $1,800 of $6 per right. The holding 84. period begins on January 11, 2010. (b.) The basis of each new share is $38 ($32 exercise price plus the basis of each right of $6). The holding period begins on the date of exercise, February 19, 2011. On sale of the rights, she has long-term capital gain of $300 ($1,200 less $900 basis) since the rights were held longer than 12 months.Although Joe has a realized loss of $3,000, it is not recognized because he sold it to his brother, a related 85. party. When Tim sells it for $16,000, Tim’s realized gain is $4,000, but he reduces that by the $3,000 disallowed loss to give $1,000 recognized gain.(a.) $7,000 gain ($37,000 - $30,000). 86. (b.) ($5,000) loss ($25,000 - $30,000). (c.) ($2,500) loss ($24,500 - $27,000). (d.) No gain or loss is recognized if the selling price is between the basis in the hands of the donor and a lesser fair market value at the date of the gift.(a.) $200,000, the fair market value at the date of death. 87. (b.) $170,000, the fair market value six months after Brian’s death. (c.) Fair market value at the date of distribution. (d.) $170,000, the fair market value at November 14, 2010. (e.) There is long-term gain on property from a decedent regardless of how long it is held.
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555 Testbank ©2010 CCH. All Rights Reserved. There is a $200 reduction in interest income per year ($2,000 divided by 10 years). By the end of 2010 88. when the bonds are sold, the basis is $11,400. Thus, Jane has a loss of $400 ($11,000 - $11,400). If Jane had not elected to amortize the premium, she would have had a loss of $1,000 at the time of sale ($11,000 - $12,000).(a.) Sale for $130,000: 89. Loss = $5,000$130,000Sale price- 135,000($150,000 basis for loss - $15,000 depreciation)($5,000)Loss(b.) Sale for $165,000: (c.) No gain or loss; the amount realized is between the basis for determining gain and the basis for determining loss. (d.) Basis for loss = $135,000 (e.) Basis for gain = $185,000 (f.) Sale for $220,000: $220,000Sale price- 185,000($200,000 basis for gain - $15,000 depreciation)$ 35,000Gain(a.) During 2010, Bill reports $30,000 ($40,000 × 75%). The gross profit rate is 75%, or $150,000 profit 90. divided by $200,000. (b.) In 2011, 2012, 2013, 2014, and 2015, Bill reports $24,000 ($32,000 × 75%).(a.) Sally’s basis is $83,000. The basis increase is $20,000, which is added on to Tina’s basis of $63,000.91. Basis increase = $100,000 × $30,000 = $20,000$150,000(b.) If the adjusted basis to Tina was $180,000, Sally’s gain basis would be $180,000. The basis for determining loss is $163,000, the fair market value at the time of the gift. (c.) If the gift in (a) had been given in 1975, the total amount of the gift taxes of $30,000 would be added to $63,000, resulting in a basis to Sally of $93,000. Chapter 10
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556 CCH Federal Taxation—Basic Principles Chapter 10 © 2010 CCH. All Rights Reserved. DIFFICULTY LEVEL RATINGS—CHAPTER 10 The following table denotes the relative dif fi culty level of each question. Teachers may wish to organize test questions based on the dif fi culty level of the particular class.
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