Reference no: EM133254301
1. Martha McDonald purchased an office building in 2001 for $630,000. In 2021, she sells the building for $950,000. Over the years, she had replaced the windows and doors at a cost of $60,000, repainted the exterior at a cost of $15,000, and installed an elevator at a cost of $90,000. Martha had taken straight line depreciation on the building for 20 years, for a total of $400,000.
What is Martha's basis in the building at the time of the sale?
What is her realized gain?
What is her recognized gain?
2. Evelyn Everest gave property to her mother Sharon when the adjusted basis of the property was $12,000 and the fair market value was $80,000. Sharon died eight months later when the property was valued at $85,000 and she left the property to Evelyn.
What is Evelyn's basis?
If Sharon had died more than a year after receiving the gift when the fair market value was $85,000, what would the basis have been to Evelyn?
3. Brenda Brewster owned stock costing $12,000 which she sold to her daughter, Rita, for $8,000. Rita sold the stock later for $14,000.
What is Brenda's gain or loss?
What is Rita's gain or loss?
If Rita had sold the stock for $10,000, how much gain or loss would she recognize?
If Rita had sold the stock for $6,000, how much gain or loss would she recognize?
4. When might a taxpayer prefer a sale over a like-kind exchange that would result in nonrecognition of gain under Section 1031?
5. Leonard and Linda Lindsay sold for $350,000 in October 2021 their residence that they had purchased in 2011 for $100,000. They made major capital improvements during their 10-year ownership totaling $30,000.
What is their excluded gain? How much must they recognize?
Suppose instead that the Lindsays sold their home for $700,000. They moved into a smaller home costing $200,000. What is their excluded gain? How much must they recognize?
Assume instead that the Lindsays resided in a very depressed neighborhood and the home was sold for only $80,000. How much gain or loss is recognized?