Reference no: EM132658692
Chapter - Property Transaction Nontaxable Exchanges
Problems: Narrative Explanation
1. Bob is notified by the city public housing authority on May 3, 2019 that his apartment building is going to be condemned as part of an urban renewal project. On June 1, 2019 Carol offers to buy the building from Bob. Bob sells the building to Carol on June 30, 2019. Condemnation occurs on September 1, 2019, and Carol received 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 involuntary conversion treatment?
b. Does the sale to Carol qualify for an 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?
2. Tonya Fletcher owns undeveloped land (adjusted basis of $80,000 and fair market value for $92,000) on the East Coast. On January 4, 2019, she exchanges it with Lisa Martin (unrelated party) for undeveloped land on the West Coast and $3,000 cash. Lisa has an adjusted basis of $72,000 for her land, and its fair market value is $89,000. Because the real estate market on the East Coast is thriving, on September 1, 2020, Lisa sell the land she acquired for $120,000
a. What is Tanya's recognized gain or loss and adjusted basis for the West Coast land on January 4, 2019?
b. What is Lisa's recognized gain or loss and adjusted basis for the East Coast land on January 4, 2019?
c. What is Lisa's recognized gain or loss from the September 1, 2020 sale?
d. What effect does Lisa's 2020 sale have on Tanya?
Chapter - Property Transaction: Capital Gains & Losses
Problems: Narrative Explanation
3. On May 9, 2019, Glenna purchased 500 shares of Ignaz Company stock for $7,500. On June 30, 2019 she writes a call option on the stock, giving the grantee the right to buy the stock for $9,000 during the following 12 month period. Glenna receives a call premium of $750 for writing the call option. The call is exercised by the grantee on December 15, 2019.
e. What is the amount and character of Glenna's gain or loss?
f. Assume that the original option expired unexercised. What is the amount and character of Glenna's gain or loss?
4. Melaney had a bad year with her investments. She lent a friend $8,000; the friend did not repay the loan when it was due and then declared bankruptcy. The loan is totally uncollectible. Melaney also was notified by the broker that the Oak corporate bonds she owned became worthless on October 13, 2019. She had purchased the bonds for $22,000 on November 10, 2018. Melaney also had a $60,000 loss on the disposition of Sec. 1244 corporate stock that she purchased several years ago. Melaney is single.
e. What are the nature (character) and amount of Melaney's losses?
f. What is Melaney's AGI (adjusted gross income) for 2019 assuming that she has $65,000 of ordinary gross income from sources (salary) other than those discussed?
g. What are the nature (character) and amount of Melaney's loss carryforwards?
Chapter - Property Transaction: Capital Gains & Losses
Computational Problems: Show work!
1. Robin Corporation has ordinary income from operations of $30,000, net long term capital gain of $10,000, and net short term capital loss of $15,000. What is the taxable income for 2019?
2. Theresa and Oliver, both over 65 years of age and married filing jointly, have not dependents. Their 2019 income tax facts are as follows:
Theresa's wages: $ 165,000
Oliver's wages: $ 33,000
Short term capital gain: $ 36,000
Long term capital loss: $( 41,000)
What is their taxable income based only upon the information provided?
3. Carol had the following transactions during 2019; a painting held for two years and sold at a gain of $85,000; 100 shares of Gray stock held six months and sold for a loss of $6,000; 50 shares of Yellow stock held 18 months and sold for a gain of $36,000.
Carol also has $264,000 to taxable income from other sources than these property transactions. What is Carol's net capital gain or loss and what is her taxable income based only upon the information provided?
4. Phil's father who died on January 10, 2019 had owned stock for 20 years with a basis of $45,000 that was transferred to Phil as a gift on Augusts 10, 2018, when the stock was worth $430,000. Phil's father had paid no gift taxes.
The stock was worth $566,000 at the date of the father's death. Phil sold the stock for $545,000 net of commissions on February 23, 2019.
What is the amount and nature of his gain or loss from the disposition of the property?
Show your computations and explain the tax law as if the taxpayer had no knowledge of taxes.
Chapter - Property Transaction: Sec. 1231 and Recapture Provisions
Computational Problems: Show work!
1. The following assets in Jack's business were sold in 2018:
Asset Holding Period Gain/(Loss)
Office equipment 6 years $1,100
Business Auto 8 months $( 800)
ABC stock (capital asset) 2 years $1,400
Office equipment, purchased for $8,000 has a zero adjusted basis. The auto was purchased for $2,000 and sold for $1,200. The ABC stock was purchased for $1,800 and sold for $3,200. In 2018 (the year of sale), Jack should report what amount of net capital gain and net ordinary income?
Show work with explanation!
2. Orange Company had machinery completely destroyed by a fire on December 23, 2019. The machinery had been acquired on April 1, 2017 for $49,000 and its adjusted basis was $14,200. Orange received $30,000 of insurance proceeds for the machinery and did not replace it. This was Orange's only casualty or theft event for the year. As a result of this event, Orange has what amount and character of gain or loss?
Show work with explanation!
3. An individual has a $40,000 Sec. 1245 gain, a $35,000 Sec. 1231 gain, a $33,000 Sec. 1231 loss, a $3,000 Sec. 1231 lookback loss, and a $15,000 long term capital gain. The net long term capital gain is?
Show work with explanation!
4. A business taxpayer sold all depreciable assets of the business, calculated the gains and losses, and would like to know the final character of those gains and losses.
The taxpayer had $353,000 of adjusted gross income before considering the gains and losses from the sale of the business assets. The taxpayer had unrecaptured Sec. 1231 lookback loss of $12,000.
What is the treatment of the gains and losses summarized in the following table after all possible netting and reclassification has been completed?
What is the taxpayer's adjusted gross income based upon the information provided?
Asset Purchase Sale Depreciation Gain/(Loss
#1 10/10/17 11/11/19 $323,000 $ 66,000
#2 10/02/17 11/11/19 $ 65,000 $(15,000)
#3 09/23/15 11/11/19 $183,000 $ 23,000
#4 09/23/15 11/11/19 $ 28,000 $ 64,000
Show work with explanation! This is a challenging problem!
Who is up to the challenge?
Attachment:- Property Transaction Nontaxable Exchanges.rar