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

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Question 41

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The basis of inherited property usually is its fair market value on the date of the decedent's death.

A) True
B) False

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Question 42

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Which of the following statements is correct?

A) Under no circumstances does part of the stock basis have to be allocated to nontaxable stock rights.
B) If the fair market value of stock rights is equal to at least 15% of the fair market value of the stock, part of the stock basis must be allocated to nontaxable stock rights.
C) An election may be made to allocate part of the stock basis to nontaxable stock rights only if the fair market value of the nontaxable stock rights is at least 15% of the fair market value of the stock.
D) Only b. and c. are correct.
E) Only a. and c. are correct.

F) C) and E)
G) A) and E)

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Question 43

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Realized losses from the sale or exchange of stock are disallowed if within 30 days before or 30 days after the sale or exchange,the taxpayer acquires substantially identical stock.

Expenditures made for ordinary repairs and maintenance of property are not added to the original basis in the determination of the property's adjusted basis whereas capital expenditures are added to the original basis.

For disallowed losses on related-party transactions,who has the right of offset?

Alvin is employed by an automobile dealership as its manager.As such,he purchased an SUV for $32,000 (fair market value is $48,000) .No other employees are permitted a discount.What is Alvin's basis in the SUV?

On September 18,2012,Jerry received land and a building from Ted as a gift.Ted had purchased the land and building on March 5,2009,and his adjusted basis and the fair market value at the date of the gift were as follows: Ted paid gift tax on the transfer to Jerry of $96,000.

Inez's adjusted basis for 9,000 shares of Cardinal,Inc.common stock is $900,000.During the year,she receives a 5% stock dividend that is a nontaxable stock dividend.

Stuart owns land with an adjusted basis of $190,000 and a fair market value of $500,000.If the property is going to be given to Stuart's nephew,Alex,it is preferable for the transfer to be by inheritance rather than by gift.

Mike's basis in his stock in Tan Corporation is $75,000.He receives nontaxable stock rights (fair market value of $20,000) when the value of the stock is $100,000.What is the basis for the stock rights?

Hilary receives $10,000 for a 15-foot wide utility easement along one of the boundaries to her property.The easement provides that no structure can be built on that portion of the property.Her adjusted basis for the property is $200,000 and the easement covers 15% of the total acreage.Determine the effect of the $10,000 payment on Hilary's gross income and her basis for the property.

When a taxpayer has purchased several lots of stock on different dates at different purchase prices and cannot identify the lot of stock that is being sold,he should use either a weighted average approach or a LIFO approach.

Why is it generally undesirable to pass property by death when its fair market value is less than basis?

The adjusted basis for a taxable bond purchased at a premium is reduced if the amortization election is made.The amount of the amortized premium is treated as an interest deduction.

On the sale of property between related parties,realized gains are recognized whereas realized losses are disallowed.

If the alternate valuation date is elected by the executor in 2012,the total basis of inherited property will be more than what it would have been if the primary valuation date and amount had been used.

Mitchell owned an SUV that he had purchased two years ago for $48,000 and which he transfers to his sole proprietorship.How is the sole proprietorship's basis for the SUV calculated? What additional information does Mitchell need?

Taylor owns common stock in Taupe,Inc.,with an adjusted basis of $100,000.She receives a preferred stock dividend which is nontaxable.

Tariq sold certain U.S.Government bonds and State of Oregon bonds at a loss to offset short-term capital gain from a previous transaction.He felt that the U.S.Government and State of Oregon bonds were "good" investments,so he repurchased identical securities within one week.Do these transactions constitute wash sales?

For gifts made after 1976,when will part of the gift tax paid by the donor be added to the donee's basis?