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Exam 14: Property Transactions: Determination of Gain or Loss and Basis Considerations

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Question 21

Multiple Choice

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Albert purchased a tract of land for $140,000 in 2014 when he heard that a new highway was going to be constructed through the property and that the land would soon be worth $200,000. Highway engineers surveyed the property and indicated that he would probably get $180,000. The highway project was abandoned in 2017 and the value of the land fell to $100,000. What is the amount of loss Albert can claim in 2017?

A) $40,000
B) $60,000
C) $80,000
D) $100,000
E) None of the above

F) B) and D)
G) A) and B)

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Question 22

Multiple Choice

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In addition to other gifts, Megan made a gift of stock to Jeri in 1976. Megan had purchased the stock in 1974 for $7,500. At the time of the gift, the stock was worth $20,000. If Megan paid $850 of gift tax on the transaction in 1976, what is Jeri's gain basis for the stock?

A) $7,500
B) $8,350
C) $9,017
D) $20,000
E) None of the above

F) A) and B)
G) A) and C)

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Question 23

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The amount received for a utility easement on land is included in the gross income of the taxpayer.

A realized gain on the sale or exchange of a personal use asset is recognized, but a realized loss on the sale, exchange, or condemnation of a personal use asset is not recognized.

Abby sells real property for $300,000. The buyer pays $5,000 in property taxes that had accrued during the year while the property was still legally owned by Abby. In addition, Abby pays $15,000 in commissions and $3,000 in legal fees in connection with the sale. How much does Abby realize (the amount realized) from the sale of her property?

The basis of property acquired in a wash sale is its cost plus the loss not recognized on the wash sale.

What is the easiest way for a taxpayer who is going to sell property that has declined in value to avoid the § 267 loss disallowance provision?

Noelle received dining room furniture as a gift from her friend, Jane. Jane's adjusted basis was $9,200 and the fair market value on the date of the gift was $7,000. Noelle decided she did not need the furniture and sold it to a neighbor six months later for $6,500. What is her recognized gain or loss?

Which of the following statements is false?

Realized gain or loss is measured by the difference between the amount realized from the sale or other disposition of property and the property's adjusted basis at the date of disposition.

Mary sells her personal use automobile for $20,000. She purchased the car two years ago for $17,000. What is Mary's recognized gain or loss? It increased in value due to its excellent mileage, yet safe design.

​Explain how the sale of investment property at a loss to a brother is treated differently from a sale to a nephew.

Define a bargain purchase of property and discuss the related tax consequences.

Discuss the effect of a liability assumption on the seller's amount realized and the buyer's adjusted basis.

Maurice sells his personal use automobile at a realized loss. Under what circumstances can Maurice deduct the loss? What if the personal use asset was sold at a realized gain?

The basis for gain and loss of personal use property converted to business use is the lower of the adjusted basis or the fair market value on the date of conversion.

Hubert purchases Fran's jewelry store for $950,000. The identifiable assets of the business are as follows: ​ Hubert and Fran agree to assign $110,000 to a 7-year covenant not to compete. How should Hubert allocate the $950,000 purchase price to the assets?

The basis of personal use property converted to business use is:

Ben sells stock (adjusted basis of $25,000) to his son, Ray, for its fair market value of $15,000. Ray gives the stock to his daughter, Trish, who subsequently sells it for $26,000. Ben's recognized loss is $0 and Trish's recognized gain is $1,000 ($26,000 - $15,000 - $10,000).

Noelle owns an automobile which she uses for personal use. Her adjusted basis is $45,000 (i.e., the original cost) . The car is worth $22,000. Which of the following statements is correct?