Determine the adjusted basis

Reference no: EM1362001

39. Cassandra sells property for a sales price of $150,000. In addition, Lana, the buyer, pays $5,000 in property taxes that had accrued during the year while the property was still legally owned by Cassandra. Cassandra paid $9,000 in commissions and $1,500 in legal fees connected with the sale of her property. What is the amount realized by Cassandra from the sale of her property?
a. $155,000.
b. $150,000.
c. $141,000.
d. $144,500.
e. $139,500

Chapter 14

40. Guthrie purchased his home for $300,000. As a sole proprietor, he operates a certified public accounting practice in his home. For this business, he uses one room exclusively and regularly as a home office. In Year 1, $1,450 of depreciation expense on the home office was deducted on his income tax return. In Year 2, Guthrie sustained losses in his business; therefore, no depreciation was taken on the home office. Had he been allowed to deduct depreciation expense, his depreciation expense would have been $1,700. What is the adjusted basis in the home?
a. $295,000.
b. $296,850.
c. $298,550.
d. $300,000.
e. None of the above.

hapter 14

41. Lolita purchases a business for $650,000. The fair market value of the assets of the business is as follows:

Equipment $ 350,000
Building 250,000

What is Lolita's cost basis in each asset?
a. $350,000 equipment, $250,000 building, $0 goodwill.
b. $379,167 equipment, $270,833 building, $50,000 goodwill.
c. $350,000 equipment, $250,000 building, $50,000 goodwill.
d. $379,167 equipment, $270,833 building, $0 goodwill.
e. None of the above.

Chapter 14
42. Garnet, Inc., owns a delivery truck which initially cost $30,000. After depreciation of $15,000 had been deducted, the truck was traded-in on a new truck that cost $40,000. Garnet was required to pay the car dealer $20,000 in cash. What is Garnet's basis for the new truck?
a. $0.
b. $35,000.
c. $40,000.
d. $45,000.
e. None of the above.

43. Paul exchanges a business machine, which has an adjusted basis of $50,000, for a new machine worth $40,000. In addition, he receives cash of $20,000. What is the recognized gain or loss and the basis of the new machine?
a. $0 and $30,000.
b. $0 and $40,000.
c. $10,000 and $40,000.
d. $10,000 and $50,000.
e. None of the above.

Reference no: EM1362001

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