Ruth Rainer incorporated her office building with a basis of$40,000, a mortgage of $55,000, a value of $100,000, anddepreciation recapture potential of $7,000. She received stockworth $45,000.
(a.) What is Ruth's realized and recognized gain? What characteris it?
(b.) What is Ruth's basis in her stocks?
(c.) What is the corporation's basis in the building?
(d.) When do the holding periods start?
Ruth Rainer incorporated her office building with a basis of$40,000, a mortgage of $55,000, a value of $100,000, anddepreciation recapture potential of $7,000. She received stockworth $45,000.
(a.) What is Ruth's realized and recognized gain? What characteris it?
(b.) What is Ruth's basis in her stocks?
(c.) What is the corporation's basis in the building?
(d.) When do the holding periods start?
Related questions
John borrowed $4,500 to purchase a machine. He later borrowed$2,000 using the machine as collateral. Both notes are nonrecourse.Ten years later, the machine has an adjusted basis of zero and twooutstanding not balances of $2,500 and $800. John sells the machinesubject to the two liabilities for $1,000. What is his realizedgain or loss?â
| a. | âNone of the above. | |
| b. | â$4,300 | |
| c. | â$0. | |
| d. | â$3,300. | |
| e. | â$1,000. |
10 points
QUESTION 2
Angelica purchases a house for $165,000. She converts theproperty to rental property when the fair market value is $140,000.After deducting depreciation (cost recovery) expense of $3,130, shesells the house for $100,000. What is her recognized gain orloss?â
| a. | â($65,000). | |
| b. | â($36,870). | |
| c. | âNone of the above. | |
| d. | â$0. | |
| e. | â($62,870). |
10 points
QUESTION 3
Olivia and Matthew exchange real estate in a like-kind exchange.Olivia's basis in the real estate, subject to a $100,000 mortgage,is $250,000 and the fair market value is $400,000. She receivesreal estate with a fair market value of $300,000 and Matthewassumes the mortgage. What is Olivia's recognized gain and adjustedbasis for the real estate received?â
| a. | âNone of the above. | |
| b. | â$50,000, $400,000. | |
| c. | â$100,000, $250,000. | |
| d. | â$100,000, $400,000. | |
| e. | â$0, $250,000. |
10 points
QUESTION 4
On October 1, Denise exchanged an apartment building (adjustedbasis of $575,000 and subject to a mortgage of $325,000) foranother apartment building owned by Quinn (fair market value of$850,000 and subject to a mortgage of $325,000). The propertytransfers were made subject to the outstanding mortgages. Whatamount of gain should Denise recognize?â
| a. | â$0. | |
| b. | â$50,000. | |
| c. | âNone of the above. | |
| d. | â$225,000. | |
| e. | â$275,000. |
10 points
QUESTION 5
Maple, Inc., owns a delivery truck which initially cost $40,000.After depreciation of $25,000 had been deducted, the truck wastraded-in on a new truck that cost $50,000. Maple was required topay the car dealer $20,000 in cash. What is Maple's basis for thenew truck assuming the exchange qualifies for §1031 treatment?â
| a. | â$0. | |
| b. | â$15,000. | |
| c. | â$35,000. | |
| d. | â$50,000. | |
| e. | âNone of the above. |
10 points
QUESTION 6
Miriam gifted property to her brother Aaron on January 25, 2016at which time it had a fair market value of $35,000. Miriam had anadjusted basis in the property of $40,000. Assume that Aaron soldthe property on June 20, 2016 for $90,000.
What amount should Aaron use for his basis?
| a. | â$90,000 | |
| b. | â$40,000 | |
| c. | âNone of the above | |
| d. | â$0 | |
| e. | â$35,000 |
10 points
QUESTION 7
Miriam gifted property to her brother Aaron on January 25, 2016at which time it had a fair market value of $35,000. Miriam had anadjusted basis in the property of $40,000. Assume that Aaron soldthe property on June 20, 2016 for $90,000.
â
What amount of gain/(loss) should Aaron recognize on thesale?â
| a. | âNone of the above | |
| b. | â$55,000 | |
| c. | â$50,000 | |
| d. | â$40,000 | |
| e. | â$90,000 |
10 points
QUESTION 8
Miriam gifted property to her brother Aaron on January 25, 2016at which time it had a fair market value of $35,000. Miriam had anadjusted basis in the property of $40,000.
â
What amount of gain/(loss) should Aaron recognize assuming hesold the property for $36,500 on 6/20/16?
| a. | âNone of the above. | |
| b. | $1,500 âShort-term capital gain | |
| c. | â$0 | |
| d. | â$3,500 Short-term capital loss | |
| e. | â$1,500 Long-term capital gain |
10 points
QUESTION 9
Miriam gifted property to her brother Aaron on January 25, 2016at which time it had a fair market value of $35,000. Miriam hadacquired the property in 1988 and had an adjusted basis in theproperty of $40,000.
â
What amount of gain/(loss) should Aaron recognize assuming hesold the property for $30,000 on 6/20/16?
| a. | â($5,000) Short-term Loss. | |
| b. | âNo Gain or Loss recognized. | |
| c. | âNone of the above | |
| d. | â($10,000) Short-term Loss. | |
| e. | â($10,000) Long-term Loss. |
10 points
QUESTION 10
Miriam gifted property to her brother Aaron on January 25, 2016at which time it had a fair market value of $90,000. Miriamacquired the property in 1966 and had an adjusted basis in theproperty of $40,000.
â
What amount of gain/(loss) should Aaron recognize assuming hesold the property for $100,000 on 6/20/16?
| a. | â$10,000 Long-term capital gain. | |
| b. | âNone of the above. | |
| c. | â$10,000 Short-term capital gain. | |
| d. | â$60,000 Long-term capital gain. | |
| e. | â$60,000 Short-term capital gain. |
1.Assume that Timberline Corporation has 2016 taxable income of $240,000 before the §179 expense.
| Asset | Purchase Date | Basis |
| Furniture (7-year) | December 1 | $350,000 |
| Computer Equipment (5-year) | February 28 | 90,000 |
| Copier (5-year) | July 15 | 30,000 |
| Machinery (7-year) | May 22 | 480,000 |
| Total | $950,000 |
a. What is the maximum amount of §179 expense Timberline may deduct for 2016? What is Timberlineâs §179 carryforward to 2017, if any?
b. What would Timberlineâs maximum depreciation expense be for 2016 assuming no bonus depreciation?
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2).]Hans runs a sole proprietorship. Hans (a single individual) reported the following net §1231 gains and losses since he began business:
| Year | Net §1231 Gains/(Losses) |
| Year 1 | ($65,000) |
| Year 2 | 15,000 |
| Year 3 | 0 |
| Year 4 | 0 |
| Year 5 | 10,000 |
| Year 6 | 50,000 |
a.
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Kase, an individual, purchased some property in Potomac, Maryland, for $200,000 approximately 10 years ago. Kase is approached by a real estate agent representing a client who would like to exchange a parcel of land in North Carolina for Kaseâs Maryland property. Kase agrees to the exchange. The transaction qualifies as a like-kind exchange and the fair market value of each property is $675,000.
What is Kaseâs realized gain or loss,
Recognized gain or loss,
Basis in the North Carolina property in each of the following scenario?
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4) Russell Corporation sold a parcel of land valued at $500,000. Its basis in the land was $275,000. For the land, Russell received $0.00 in cash in year 0 and a note providing that Russell will receive $250,000 in year 1 and $250,000 in year 2 from the buyer.
a. What is Russellâs realized gain on the transaction?
b. What is Russellâs recognized gain in year 0, year 1, and year 2?
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5). Rayleen owns a condominium near Orlando, Florida. This year, she incurs the following expenses in connection with her condo:
| Insurance | $1,250 |
| Mortgage interest | 7,000 |
| Property taxes | 2,100 |
| Repairs and maintenance | 800 |
| Utilities | 2,300 |
| Depreciation | 9,000 |
During the year, Rayleen rented the condo for 130 days and she received $25,000 of rental receipts. She did not use the condo at all for personal purposes during the year. Rayleen is considered to be an active participant in the property. Rayleen's AGI from all sources other than the rental property is $130,000. Rayleen does not have passive income from any other sources. What is Rayleen's AGI?
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6).]Careen owns a condominium near Newport Beach in California. This year, she incurs the following expenses in connection with her condo:
| Insurance | $1,500 |
| Mortgage interest | 8,500 |
| Property taxes | 4,000 |
| Repairs and maintenance | 950 |
| Utilities | 1,900 |
| Depreciation | 5,500 |
During the year, Careen rented the condo for 90 days, receiving $20,000 of gross income. She personally used the condo for 50 days. Assuming Careen uses the IRS method of allocating expenses to rental use of the property. What is Careen's net rental income for the year?
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7). Darren (single) purchased a home on January 1, 2012 for $400,000. Darren lived in the home as his primary residence until January 1, 2014 when he began using the home as a vacation home. He used the home as a vacation home until January 1 2015 (he used a different home as his primary residence from January 1, 2014 to January 1, 2015). On January 1, 2015, Darren moved back into the home and used it as his primary residence until January 1, 2016 when he sold the home for $500,000. What amount of the $100,000 gain Darren realized on the sale must he recognize for tax purposes in 2016?
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Bonus:
Moab [an unincorporated entity] manufactures and distributes high-tech biking gadgets. It has decided to streamline some of its operations so that it will be able to be more productive and efficient. Because of this decision it has entered into several transactions during the year.
Part (1) Determine the gain/loss realized and recognized in the current year for each of these events. Also determine whether the gain/loss recognized is §1231, capital, or ordinary. Construct a chart to show transactions and gains/loss in good format.
Moab sold a machine that it used to make computerized gadgets for $27,300 cash. It originally bought the machine for $19,200 three years ago and has taken $8,000 depreciation.
Moab held stock in ABC Corp. which had a value of $12,000 at the beginning of the year. That same stock had a value of $15,230 at the end of the year.
sold some of its inventory for $7,000 cash. This inventory had a basis of $5,000.
Moab disposed of an office building with a fair market value of $75,000 for another office building with a fair market value of $55,000 and $20,000 in cash. It originally bought the office building seven years ago for $62,000 and has taken $15,000 in depreciation.
Moab sold land it held for investment for $28,000. It originally bought the land for $32,000 two years ago.
Moab sold another machine for a note, payable in four annual installments of $12,000. The first payment was received in the current year. It originally bought the machine two years ago for $32,000 and had claimed $9,000 in depreciation expense against the machine.
Moab sold stock it held for eight years for $2,750. It originally purchased the stock for $2,100.
Moab sold another machine for $7,300. It originally purchased this machine six months ago for $9,000 and has claimed $830 in depreciation expense against the asset.
| Item | Sales price | Cost | Depreciation where applicable | Gain/loss | Character of gain/loss |
| A | $27,300 | $19,200 | $8,000 | ||
| B | |||||
| C | |||||
| D | |||||
| E | |||||
| F | |||||
| G | |||||
| H | |||||
Part (2) From the recognized gains/losses determined in part 1, determine the net §1231 gain/loss and the net ordinary gain/loss Moab will recognize on its tax return. Moab also has $2,000 of nonrecaptured §1231 losses from previous years.
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