Reference no: EM131449867

Here is the question and the template from the teacher to follow. I really hope this helps I am having a real hard time getting this so please explain what you can and use the template below:

Emelio and Charita are married taxpayers with 2 dependent children. Emelio starts a computer consulting business in 2012. Charita works as a real estate broker. During 2012, they have the following property transactions:

a. Emelio purchases an office building on March 15, 2012, to use in his computer consulting business.   The price of the property is $120,000. He pays $15,000 in cash and signs a 30-year, 10% mortgage for the remainder. For property tax purposes, the land is assessed at $10,000 and the building at $30,000. Emelio pays $3,000 for a new roof for the building.

b. Emelio was employed by Computer Corporation as a consultant starting his own business. Computer Corporation lets Emelio purchase the computer equipment in his office for use in his business.    He makes the purchase on April 3, 2012. The fair market value of the equipment is $20,000, but Emelio pays $16,000 to Computer Corporation. Computer Corporation's original basis in the equipment was $36,000 and its adjusted basis at the time of the transfer to Emelio is $8,000.

c. Emelio takes the color printer that the children have been using at home to use in the office in his consulting business. The original price of the printer was $8,000, but it was worth $4,000 when converted to business use on April 1, 2012.

d. On March 30, 2012, Emelio buys office furniture to use in his business for $2,200.

e. In January, Charita purchases a new car to use in her real estate business. She pays $19,500 for the car and $1,500 to have a sunroof installed in it. During the year, she drives the car 6,800 miles for business and 3,200 for personal use.

f. Charita uses a room in their home exclusively and regularly as an office, The room is 12 feet by 12 feet. The total area in the home is 2,400 square feet. Charita purchased office furniture for $800 when she started using the office in the home in June 2007. She and Emelio paid $140,000 for the property in 2002, of which $20,000 is allocated to the land.

g. Emelio and Charita own a rental house. Charita acquired the house from her former husband in 2003 as part of their divorce settlement. Charita and her former husband had paid $50,000 for the house (which is her basis in the property) in 1996. Charita estimates that the house had increased in value to $90,000 when it was converted to rental property in October 2004.

h. Charita inherits 200 shares of stock in Desmond, Inc., from her uncle, who paid $700 for it in 1980. At the date of the uncle's death, the stock is worth $14,000. The executor of the estate elects to use the alternate valuation date, at which time the stock is worth $13,300. Charita receives the stock 2 months later when it is worth $14,500.

i. Emelio and Charita own stock in Software Corporation. They purchased 1,000 shares for $20 per share in July 2005. They paid $400 in brokerage commissions. On July 21, 2012, Software Corporation distributed a 2-for-1 stock split. The fair market value at the time of the split was $100 per share.

j. On July 21, 2007, Emelio's father gives him 100 shares of stock in Flex Corporation. His father paid $35 per share in June 1998. The fair market value at the date of the gift was $45 per share.

Based on the information provided, determine the initial basis of each of Emelio and Charita's assets. If more than one basis is possible, list the alternatives and explain when each basis would apply.

Ch 9 89

Emelio ' s Business Assets:

Land and Building - Purchase Price = $120,000

Land            =

Building       =

Computer Equipment -

Basis in Computer=

Printer –

          Split-basis rule:     Gain basis =

                                      Loss and depreciation basis =

Office Furniture Purchased - The basis in the furniture is =

Charita ' s Business Assets:

Charita ' s Automobile –

The automobile is a mixed-use asset. The basis must be allocated between business and personal use:

Business Use        =

Personal Use         =

Home Office -

[(? x ? = ?) ¸ 2,400] x $? = $?

Investment Assets:

Rental House -

Land            =

Building            =

Inherited Stock =

Stock in Software Corporation -

Purchase Price (? x $?)                    $?

Brokerage Commission                        ?

Total Basis                                                  $?

Stock from father - Emelio's basis is his father's basis or $? per share x ? shares = $?