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tax problems - questin and answer




Question;23. LO.5a. Mort owns 500 shares of Pear, Inc. stock with an adjusted basis of $22,000. On July28, 2013, he sells 100 shares for $3,000. On August 16, 2013, he purchases another100 shares for $3,400. Mort?s realized loss of $1,400 ($3,000? $4,400) on the July 28 sale is not recognized, and his adjusted basis for the 100 shares purchased on August16 is $4,800. Explain.b. How would your answer in (a) change if Mort purchased the 100 shares on December27, 2013, rather than on August 16, 2013?24. LO.7 What are the three requirements that must be satisfied for a transaction to qualify for nontaxable exchange treatment under ? 1031?25. LO.7 Karla exchanges personal use property for property to be held for productive use in a trade or business. Can this transaction qualify for like-kind exchange treatment? Explain.26. LO.7, 11 Amos owns a lathe (adjusted basis of $40,000) that he uses in his business.He exchanges the lathe and $20,000 in cash for a new lathe worth $50,000. May Amos avoid like-kind exchange treatment to recognize his realized loss of $10,000? Explain.27. LO.7 Ross would like to dispose of some land he acquired five years ago because he believes that it will not continue to appreciate. Its value has increased by $50,000 over the five-year period. He also intends to sell stock that has declined in value by $50,000 during the eight-month period he has owned it. Ross has four offers to acquire the stock and land:Buyer number 1: Exchange land.Buyer number 2: Purchase land for cash.Buyer number 3: Exchange stock.Buyer number 4: Purchase stock for cash.Identify the tax issues relevant to Ross in disposing of this land and stock.28. LO.7 Emanual is a 10% limited partner in the EVI limited partnership. He exchanges his partnership interest in EVI for a 20% limited partnership interest in DRI. Both partnerships are in the oil drilling business. Emanual?s adjusted basis for his EVI partnership interest is $100,000, and the fair market value of the partnership interest he receives inDRI is $145,000.a. What is Emanual?s recognized gain or loss associated with the exchange?b. Would the answer in (a) be different if Emanual exchanged a general partnership interest for a general partnership interest? Explain.29. LO.7 Sue exchanges a sport utility vehicle (adjusted basis of $16,000, fair market value of $19,500) for cash of $2,000 and a pickup truck (fair market value of $17,500). Both vehicles are for business use. Sue believes that her basis for the truck is $17,500. In calculating her basis, what has Sue failed to consider?30. LO.7 In connection with like-kind exchanges, discuss each of the following:a. Realized gain.b. Realized loss.c. Recognized gain.d. Recognized loss.e. Postponed gain.f. Postponed loss.g. Basis of like-kind property received.h. Basis of boot received.31. LO.7 Edith exchanges a machine used in her business for another machine and stock of Teal, Inc. If Edith had sold her machine, she would have had a realized gain. Explain why the new machine will have a different holding period than the stock.32. LO.7 Mortgaged real estate may be received in a like-kind exchange. If the taxpayer?s mortgage is assumed, what effect does the mortgage have on the recognition of realized gain? On the basis of the real estate received?33. LO.8 Sheila?s appreciated property is involuntarily converted. She receives insurance proceeds equal to the fair market value of the property. What is the minimum amountSheila must reinvest in qualifying property to defer recognition of realized gain?34. LO.8 What constitutes an involuntary conversion?35. LO.8 Vera owns an office building that she leases to tenants. If the building is destroyed by a tornado, is the functional use test or the taxpayer use test applied as to replacement property? Explain the differences between the two tests.36. LO.8 On June 5, 2013, Brown, Inc., a calendar year taxpayer, receives cash of $750,000 from the county upon condemnation of its warehouse building (adjusted basis of $500,000 and fair market value of $750,000).a. What must Brown do to qualify for ? 1033 postponement of gain treatment?b. How would your advice to Brown differ if the adjusted basis was $795,000?37. LO.8 Reba, a calendar year taxpayer, owns an office building that she uses in her business.The building is involuntarily converted on November 15, 2013. On January 5,2014, Reba receives enough proceeds to produce a realized gain. What is the latest date she can replace the building and qualify for ? 1033 postponement treatment if the conversion event is:a. A flood?b. A condemnation?c. A tornado?38. LO.8 Bob is notified by the city public housing authority on May 3, 2013, that his apartment building is going to be condemned as part of an urban renewal project. On June1, 2013, Carol offers to buy the building from Bob. Bob sells the building to Carol onJune 30, 2013. Condemnation occurs on September 1, 2013, and Carol receives the condemnation proceeds from the city. Assume that both Bob and Carol are calendar year taxpayers.a. What is the earliest date on which Bob can dispose of the building and qualify for ? 1033 postponement treatment?b. Does the sale to Carol qualify as a ? 1033 involuntary conversion? Why or why not?c. What is the latest date on which Carol can acquire qualifying replacement property and qualify for postponement of the realized gain?d. What type of property will be qualifying replacement property?39. LO.8 A warehouse owned by Martha and used in her business (i.e., to store inventory) is being condemned by the city to provide a right of way for a highway. The warehouse has appreciated by $180,000 based on Martha?s estimate of its fair market value. In the negotiations, the city is offering $35,000 less than what Martha believes the property is worth. Alan, a real estate broker, has offered to purchase Martha?s property for $20,000 more than the city?s offer. Martha plans to invest the proceeds she will receive in an office building she will lease to various tenants.a. Identify the relevant tax issues for Martha.b. Would the answer in (a) change if Martha?s warehouse was property being held for investment rather than being used in her business? Explain.40. LO.8 When does the holding period begin for replacement property acquired in an involuntary conversion? For property received in a like-kind exchange?41. LO.9 What requirements must be satisfied to qualify for the ? 121 exclusion on the sale of a principal residence?42. LO.9 Gary, who is single, sells his principal residence (owned and occupied by him for seven years) in November 2013 for a realized gain of $148,000. He had purchased a more expensive new residence eight months prior to the sale. He anticipates that he will occupy this new house as his principal residence for only about 18 additional months. He expects it to appreciate substantially while he owns it. Gary would like to recognize the realized gain on the 2013 sale to offset a large investment loss from the sale of stock. Can he recognize the realized gain of $148,000 on the sale of his principal residence in 2013?43. LO.9 To qualify for exclusion treatment on the sale of a principal residence, the residence must have been owned and used by the taxpayer for at least two years during the five-year period ending on the date of the sale. Are there any exceptions to this provision?Explain.44. LO.10 On May 5, 2013, Samantha sells her stock (adjusted basis of $45,000) in Rose,Inc., a publicly traded company, for $60,000. On May 31, 2013, she pays $65,000 for stock in Lime, Inc., a specialized small business investment company. Samantha believes that her adjusted basis for the Lime stock is $45,000.a. Evaluate Samantha?s calculation of the adjusted basis for her Lime stock.b. How would your answer change if Samantha purchased the replacement stock onJuly 15 rather than on May 31?


Paper#39618 | Written in 18-Jul-2015

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