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

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Question 81

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The basis of property received by gift is always a carryover basis.

A) True
B) False

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Question 82

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The holding period for property acquired by gift is automatically long term.

A) True
B) False

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Question 83

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The fair market value of property received in a sale or other disposition is the price at which property will change hands between a willing seller and a willing buyer when neither is compelled to sell or buy.

What is the difference between the depreciation (or cost recovery)allowed and the depreciation (or cost recovery)allowable and what effect does each have on the adjusted basis of property?

Sam and Cheryl,husband and wife,own property jointly.The property has an adjusted basis of $400,000 and a fair market value of $500,000.

On January 15 of the current taxable year,Merle sold stock with a cost of $40,000 to his brother Ned for $25,000,its fair market value.On June 21,Ned sold the stock to a friend for $26,000.

Monroe's delivery truck is damaged in an accident.Monroe's adjusted basis for the delivery truck prior to the accident is $20,000.If Monroe receives insurance proceeds of $21,000 and recognizes a casualty gain of $1,000,his adjusted basis for the delivery truck after the accident is $21,000.

A realized gain whose recognition is postponed results in the temporary recovery of more than the taxpayer's cost or other basis.

Ben sells stock (adjusted basis of $25,000)to his son,Ray,for its fair market value of $15,000.Ray gives the stock to his daughter,Trish,who subsequently sells it for $26,000.Ben's recognized loss is $0 and Trish's recognized gain is $1,000 ($26,000 - $15,000 - $10,000).

Which of the following is correct?

Identify two tax planning techniques that can be used to avoid the wash sale disallowance of loss.

Lynn purchases a house for $52,000.She converts the property to rental property when the fair market value is $115,000.After deducting depreciation (cost recovery) expense of $1,130,she sells the house for $120,000.What is her recognized gain or loss?

Karen owns City of Richmond bonds with a face value of $10,000.She purchased the bonds on January 1,2012,for $11,000.The maturity date is December 31,2021.The annual interest rate is 8%.What is the amount of taxable interest income that Karen should report for 2012,and the adjusted basis for the bonds at the end of 2012,assuming straight-line amortization is appropriate?

Describe the relationship between the recovery of capital doctrine and the realized and recognized gain and loss concepts.