Question: Karla exchanges personal use property for property

> Roger inherited 100 shares of Periwinkle stock when his mother, Emily, died. Emily had acquired the stock for a total of $60,000 on November 15, 2013. She died on August 10, 2017, and the shares were worth a total of $55,000 at that time. Roger sold the

> Ten years ago, Liam, who is single, purchased a personal residence for $340,000 and took out a mortgage of $200,000 on the property. In May of the current year, when the residence had a fair market value of $440,000 and Liam owed $140,000 on the mortgage

> Maria held vacant land that qualified as an investment asset. She purchased the vacant land on April 10, 2013. She exchanged the vacant land for a rental house in a qualifying like-kind exchange on January 22, 2017. Maria was going to hold the house for

> A corporation distributes a truck it has owned for three years to its sole shareholder. The shareholder will use the truck for business activity. The truck’s fair market value at the time of the distribution is greater than its adjusted basis but less th

> Angie owns numerous strip malls. A major tenant of one of the strip malls wanted to cancel its lease because it was moving to another city. After lengthy negotiations, the tenant paid Angie $60,000 to cancel its obligations under the lease. If the tenant

> Freys, Inc., sells a 12-year “stuffed potato” franchise to Reynaldo. The franchise contains many restrictions on how Reynaldo may operate his store. For instance, Reynaldo cannot use less than Grade 10 Idaho potatoes, must bake the potatoes at a constant

> Issac has AGI of $73,400 and incurred the following expenses. How much of the business and personal expenditures are deductible (after any limitation) either as miscellaneous itemized deductions or as other itemized deductions? Cost of uniforms required

> Mac, an inventor, obtained a patent on a chemical process to clean old aluminum siding so that it can be easily repainted. Mac has a $50,000 tax basis in the patent. Mac does not have the capital to begin manufacturing and selling this product, so he has

> Hilde purchased all of the rights to a patent on a new garden tool developed by a friend of hers who is an amateur inventor. The inventor obtained the patent rights, set up a manufacturing company to produce and sell the garden tool, and produced substan

> Fred is an investor in vacant land. When he thinks he has identified property that would be a good investment, he approaches the landowner, pays the landowner for a “right of first refusal” to purchase the land, records this right in the property records

> Mike purchased four $100 tickets to a fund-raising dinner and dance sponsored by the public library, a qualified charitable organization. In its advertising for the event, the library indicated that the cost of the tickets would be deductible for Federal

> Benny purchased $400,000 of Peach Corporation face value bonds for $320,000 on November 13, 2016. The bonds had been issued with $80,000 of original issue discount because Peach was in financial difficulty in 2016. On December 3, 2017, Benny sold the bon

> Steven established a sole proprietorship in 2012. He sold § 1231 assets at a loss in 2015 and 2016. He had only sold § 1231 assets at a gain before 2015. In 2017, he could sell a § 1231 asset at a gain and would like to have the gain taxed as a long-term

> Melaney has 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 her broker that the Oak corporate b

> After netting all of her short-term and long-term capital gains and losses, Misty has a net short-term capital loss and a net long-term capital loss. Can she net these against each other? Why or why not?

> At the date of a short sale, Sylvia has held substantially identical securities for more than 12 months. What is the nature of any gain or loss from the close of her short sale?

> Blue Corporation and Fuchsia Corporation are engaged in a contract negotiation over the use of Blue’s trademarked name, DateSiteForSeniors. For a onetime payment of $45,000, Blue licensed Fuchsia to use the name DateSiteForSeniors, and the license requir

> Hubert purchases all of the rights in a patent from the inventor who developed the patented product. After holding the patent for two years, Hubert sells all of the rights in the patent for a substantial gain. What issues does Hubert face if he wants to

> Anwar owns vacant land that he purchased many years ago as an investment. After getting approval to subdivide it into 35 lots, he made minimal improvements and then sold the entire property to a real estate developer. Anwar’s recognized gain on the sale

> Alison owns a painting that she received as a gift from her aunt 10 years ago. The aunt created the painting. Alison has displayed the painting in her home and has never attempted to sell it. Recently, a visitor noticed the painting and offered Alison $5

> Justin Stone was an employee of DataCare Services, Inc. His salary was $45,000 through November 10, 2016, when he was laid off. DataCare Services provided medical insurance for Justin and his family during his employment and agreed to continue this cover

> Ashley Panda lives at 1310 Meadow Lane, Wayne, OH 43466, and her Social Security number is 123-45-6789. Ashley is single and has a 20-year-old son, Bill. His Social Security number is 111-11-1112. Karl lives with Ashley, and she fully supports him. Bill

> Olivia wants to buy some vacant land for investment purposes. She cannot afford the full purchase price. Instead, Olivia pays the landowner $8,000 to obtain an option to buy the land for $175,000 anytime in the next four years. Fourteen months after purc

> Determine the realized, recognized, and postponed gain or loss and the new basis for each of the following like-kind exchanges: Adjusted Basis of Old Machine Fair Market Value Вoot Boot Given of New Asset Received $ 7,000 $ 0- $12,000 $4.000 a. b. 1

> Maria meets all of the requirements of § 1237 (subdivided realty). In 2017, she begins selling lots and sells four separate lots to four different purchasers. She also sells two contiguous lots to another purchaser. The sales price of each lot is $30,000

> A corporation distributes a truck it has owned for three years to its sole shareholder. The shareholder will use the truck for personal use activity. The truck’s fair market value at the time of the distribution is greater than its adjusted basis but les

> Paolo and Isadora Shaw are married, file a joint tax return, and have one dependent child, Dante. The Shaws report modified AGI of $148,000. The couple paid $12,000 of tuition and $10,000 for room and board for Dante, a fulltime first-year student at Ser

> For calendar year 2017, Jean was a self-employed consultant with no employees. She had $80,000 of net profit from consulting and paid $7,000 in medical insurance premiums on her policy covering 2017. How much of these premiums may Jean deduct as a deduct

> Shelia purchases $50,000 of newly issued Gingo Corporation bonds for $45,000. The bonds have original issue discount (OID) of $5,000. After Sheila amortized $2,300 of OID and held the bonds for four years, she sold the bonds for $48,000. What is the amou

> Enzo is a single taxpayer with the following gains and losses for 2017: • $2,100 short-term capital loss. • $24,000 long-term capital gain from sale of stock. • $14,000 § 1231 gain that is all unrecaptured § 1250 gain. What is the amount and character

> An apartment building was acquired in 2008. The depreciation taken on the building was $123,000, and the building was sold for a $34,000 gain. What is the maximum amount of 25% gain?

> Jacob purchased business equipment for $56,000 in 2014 and has taken $35,000 of regular MACRS depreciation. Jacob sells the equipment in 2017 for $26,000. What is the amount and character of Jacob’s gain or loss?

> Lena is a sole proprietor. In April of this year, she sold equipment purchased four years ago for $26,000 with an adjusted basis of $15,500 for $17,000. Later in the year, Lena sold another piece of equipment purchased two years ago with an adjusted basi

> On May 9, 2017, Glenna purchases 500 shares of Ignaz Company stock for $7,500. On June 30, 2017, 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

> Dexter owns a large tract of land and subdivides it for sale. Assume that Dexter meets all of the requirements of § 1237 and during the tax year sells the first eight lots to eight different buyers for $22,000 each. Dexter’s basis in each lot sold is $15

> In a § 1031 like-kind exchange, Rafael exchanges a piece of equipment that originally cost $200,000. On the date of the exchange, the equipment given up has an adjusted basis of $85,000 and a fair market value of $110,000. Rafael pays $15,000 and receive

> Faith Godwin is a dealer in securities. She has spotted a fast-rising company and would like to buy and hold its stock for investment. The stock is currently selling for $2 per share, and Faith thinks it will climb to $40 a share within two years. Faith’

> Tom Howard and Frank Peters are good friends (and former college roommates). Each owns investment property in the other’s hometown (Tom lives in Kalamazoo, MI; Frank lives in Austin, TX). To make their lives easier, they decide to exchange the investment

> Sissie owns two items of business equipment. Both were purchased in 2013 for $100,000, both have a 7-year MACRS recovery period, and both have an adjusted basis of $37,490. Sissie is considering selling these assets in 2017. One of them is worth $60,000,

> Dora incurs the following research expenditures. In-house wages…………………………………...$60,000 In-house supplies…………………………………….5,000 Paid to ABC, Inc., for research services…..80,000 a. Determine the amount of Dora’s qualified research expenditures for the tax

> Renata Corporation purchased equipment in 2015 for $180,000 and has taken $83,000 of regular MACRS depreciation. Renata Corporation sells the equipment in 2017 for $110,000. What is the amount and character of Renata’s gain or loss?

> Paul suffers from emphysema and severe allergies and, upon the recommendation of his physician, has a dust elimination system installed in his personal residence. In connection with the system, Paul incurs and pays the following amounts during 2017: Doc

> Elliott has the following capital gain and loss transactions for 2017. Short-term capital gain $......................1,500 Short-term capital loss……………………(3,600) Long-term capital gain (28%)…………..12,000 Long-term capital gain (25%)……………4,800 Long-term

> Coline has the following capital gain and loss transactions for 2017. Short-term capital gain $....................5,000 Short-term capital loss…………………..(2,100) Long-term capital gain (28%)…………..6,000 Long-term capital gain (15%)……………2,000 Long-term cap

> Shen purchased corporate stock for $20,000 on April 10, 2015. On July 14, 2017, when the stock was worth $12,000, Shen died and his son, Mijo, inherited the stock. Mijo sold the stock for $14,200 on November 12, 2017. What is the amount and character of

> Ted and Marvin Brown purchased an apartment building in 2006 as equal tenants in common. After a hectic decade of co-ownership, the brothers decided that their business association should be terminated. This led to the sale of the apartment building and

> Your client, Jacob, turned 66 years old this year. Jacob has no heirs and has decided that he would like to sell a life insurance policy to fund a trip to Africa that he has wanted to take. Jacob knew that he could surrender the policy (a whole-life poli

> Norma, who is single and uses the cash method of accounting, lives in a state that imposes an income tax. In April 2017, she files her state income tax return for 2016 and pays an additional $1,000 in state income taxes. During 2017, her withholdings for

> Terry owns real estate with an adjusted basis of $600,000 and a fair market value of $1.1 million. The amount of the nonrecourse mortgage on the property is $2.5 million. Because of substantial past and projected future losses associated with the real es

> In general, the 45-day identification period and the 180-day exchange period for like-kind exchanges cannot be extended. Does this rule change if the like-kind property or the taxpayer involved in the exchange is located in a Presidentially declared disa

> How are transactions using Bitcoin (virtual currency) treated under U.S. tax law? Some background on Bitcoin can be found at https://bitcoin .org/en/faq. Locate the IRS guidance on this question, and provide a one-page written summary for your instructor

> During 2017, Lincoln Company hires seven individuals who are certified to be members of a qualifying targeted group. Each employee works in excess of 600 hours and is paid wages of $7,500 during the year. Determine the amount of Lincoln’s work opportunit

> Norm is negotiating the sale of a tract of his land to Pat. Use the following classification scheme to classify each of the items contained in the proposed sales contract: Legend DARN = Decreases amount realized by Norm IARN = Increases amount realized

> Tab exchanges real estate used in his business along with stock for real estate to be held for investment. The stock transferred has an adjusted basis of $45,000 and a fair market value of $50,000. The real estate transferred has an adjusted basis of $85

> Emma Doyle is employed as a corporate attorney. For calendar year 2017, she had AGI of $100,000 and paid the following medical expenses: Medical insurance premiums………………………………………………….….…$3,700 Doctor and dentist bills for Bob and April (Emma’s parents).

> Steve owns Machine A (adjusted basis of $12,000 and fair market value of $15,000), which he uses in his business. Steve sells Machine A for $15,000 to Aubry (a dealer) and then purchases Machine B for $15,000 from Joan (also a dealer). Machine B would no

> Ed owns investment land with an adjusted basis of $35,000. Polly has offered to purchase the land from Ed for $175,000 for use in a real estate development. The amount offered by Polly is $10,000 in excess of what Ed perceives as the fair market value of

> Barbella purchased a wedding ring for $15 at a yard sale in May. She thought the ring was costume jewelry, but it turned out to be a real diamond ring. She is not in the business of buying and selling anything. She researched the ring on the internet and

> On July 16, 2017, Logan acquires land and a building for $500,000 to use in his sole proprietorship. Of the purchase price, $400,000 is allocated to the building, and $100,000 is allocated to the land. Cost recovery of $4,708 is deducted in 2017 for the

> Marge owns land and a building (held for investment) with an adjusted basis of $75,000 and a fair market value of $250,000. The property is subject to a mortgage of $400,000. Because Marge is in arrears on the mortgage payments, the creditor is willing t

> Stephanie owns a machine (adjusted basis of $90,000; fair market value of $125,000) that she uses in her business. She exchanges it for another machine (worth $100,000) and stock (worth $25,000). Determine Stephanie’s: a. Realized and recognized gain or

> Taylor is negotiating to buy some land. Under the first option, Taylor will give Ella $150,000 and assume her mortgage on the land for $100,000. Under the second option, Taylor will give Ella $250,000, and she will immediately pay off the mortgage. Taylo

> If a taxpayer sells property for cash, the amount realized consists of the net proceeds from the sale. For each of the following, indicate the effect on the amount realized: a. The property is sold on credit. b. A mortgage on the property is assumed by t

> Carol and Dave each purchase 100 shares of stock of Burgundy, Inc., a publicly owned corporation, in July for $10,000 each. Carol sells her stock on December 31 for $8,000. Because Burgundy’s stock is listed on a national exchange, Dave is able to ascert

> Ivan invests in land, and Grace invests in taxable bonds. The land appreciates by $8,000 each year, and the bonds earn interest of $8,000 each year. After holding the land and bonds for five years, Ivan and Grace sell them. There is a $40,000 realized ga

> To qualify for exclusion treatment on the sale of a principal residence, the residence must have been owned and used by the taxpayer for at least two years during the five-year period ending on the date of the sale. Are there any exceptions to this provi

> A warehouse owned by Martha and used in her business (i.e., to store inventory) is being condemned by the city to provide a right of way for a highway. The warehouse has appreciated by $180,000 based on Martha’s estimate of its fair market value. In the

> Bob is notified by the city public housing authority on May 3, 2017, that his apartment building is going to be condemned as part of an urban renewal project. On June 1, 2017, Carol offers to buy the building from Bob. Bob sells the building to Carol on

> Edith’s warehouse (adjusted basis of $450,000) is destroyed by a hurricane in October 2017. Edith, a calendar year taxpayer, receives insurance proceeds of $525,000 in January 2018. Calculate Edith’s realized gain or loss, recognized gain or loss, and ba

> Miller owns a personal residence with a fair market value of $195,000 and an outstanding first mortgage of $157,500. Miller gets a second mortgage on the residence and in return borrows $10,000 to purchase new jet skis. How much of the first and second m

> Ida Ross has decided to purchase a new home in a retirement community for $400,000. She has $50,000 in cash for the down payment but needs to borrow the remaining $350,000 to finance the purchase. Her financial adviser, Marc, suggests that rather than se

> Reba, a calendar year taxpayer, owns an office building that she uses in her business. The building is involuntarily converted on November 15, 2017. On January 5, 2018, Reba receives enough proceeds to produce a realized gain. What is the latest date she

> Susan owns a car that she uses exclusively for personal purposes. Its original cost was $26,000, and the fair market value is $12,000. She exchanges the car and $18,000 cash for a new car. a. Calculate Susan’s realized and recognized gain or loss. b. Cal

> Ron sold his sailboat for a $5,000 loss in the current year because he was diagnosed with skin cancer. His spouse wants him to sell his Harley Davidson motorcycle because her brother broke his leg while riding his motorcycle. Because Ron no longer has an

> Vera owns an office building that she leases to tenants. If the building is destroyed by a tornado, is the functional use test or the taxpayer use test applied as to replacement property? Explain the differences between the two tests.

> Sheila’s appreciated property is involuntarily converted. She receives insurance proceeds equal to the fair market value of the property. What is the minimum amount Sheila must reinvest in qualifying property to defer recognition of realized gain?

> Mortgaged real estate may be received in a like-kind exchange. If the taxpayer’s mortgage is assumed, what effect does the mortgage have on the recognition of realized gain? On the basis of the real estate received?

> Edith exchanges a machine used in her business for another machine and stock of Teal, Inc. If Edith had sold her machine, she would have had a realized gain. Explain why the new machine will have a different holding period than the stock.

> Ross would like to dispose of some land he acquired five years ago because he believes that it will not continue to appreciate. Its value has increased by $50,000 over the five-year period. He also intends to sell stock that has declined in value by $50,

> George is the owner of numerous classic automobiles. His intention is to hold the automobiles until they increase in value and then sell them. He rents the automobiles for use in various events (e.g., antique automobile shows) while he is holding them. I

> Which of the following qualify as like-kind exchanges under § 1031? a. Improved for unimproved real estate. b. Vending machine (used in business) for inventory. c. Rental house for personal residence. d. Business equipment for securities. e. Warehouse fo

> Comment on the following transactions: a. Mort owns 500 shares of Pear, Inc. stock with an adjusted basis of $22,000. On July 28, 2017, he sells 100 shares for $3,000. On August 16, 2017, he purchases another 100 shares for $3,400. Mort’s realized loss o

> Marilyn owns land that she acquired three years ago as an investment for $250,000. Because the land has not appreciated in value as she anticipated, she sells it to her brother, Amos, for its fair market value of $180,000. Amos sells the land two years l

> Thelma inherited land from Sadie on June 7, 2017. The land appreciated in value by 100% during the six months it was owned by Sadie. The value has remained stable during the three months Thelma has owned it, and she expects it to continue to do so in the

> Five years ago Bridget decided to purchase a limited partnership interest in a fast-food restaurant conveniently located near the campus of Southeast State University. The general partner of the restaurant venture promised her that the investment would p

> In two unrelated transactions, Laura exchanges property that qualifies for like-kind exchange treatment. In the first exchange, Laura gives up office equipment purchased in May 2015 (adjusted basis of $20,000; fair market value of $17,000) in exchange fo

> Derek, a cash basis, unmarried taxpayer, had $610 of state income tax withheld during 2017. Also in 2017, Derek paid $50 that was due when he filed his 2016 state income tax return and made estimated payments of $100 toward his 2017 state income tax liab

> Robin inherits 1,000 shares of Wal-Mart stock from her aunt in 2017. According to the information received from the executor of her aunt’s estate, Robin’s adjusted basis for the stock is $55,000. Albert, Robin’s fiance, receives 1,000 shares of Wal-Mart

> Simon owns stock that has declined in value since acquired. He has decided either to give the stock to his nephew, Fred, or to sell it and give Fred the proceeds. If Fred receives the stock, he will sell it to obtain the proceeds. Simon is in the 15% tax

> Devon Bishop, age 45, is single. He lives at 1507 Rose Lane, Albuquerque, NM 87131. His Social Security number is 111-11-1112. Devon does not want $3 to go to the Presidential Election Campaign Fund. Devon’s wife, Ariane, passed away in 2012. Devon’s son

> Rennie owns a video game arcade. He buys vintage video games from estates, often at much less than the retail value of the property. He usually installs the vintage video games in a special section of his video game arcade that appeals to players of “cla

> Tom and Alice Honeycutt, ages 35 and 36, respectively, live at 101 Glass Road, Delton, MI 49046. Tom is a county employee, and Alice is a self-employed accountant. Tom’s Social Security number is 111-11-1111; Alice’s Social Security number is 123-45-6789

> Melba purchases land from Adrian. Melba gives Adrian $225,000 in cash and agrees to pay Adrian an additional $400,000 one year later plus interest at 5%. a. What is Melba’s adjusted basis for the land at the acquisition date? b. What is Melba’s adjusted

> Camilo’s property, with an adjusted basis of $155,000, is condemned by the state. Camilo receives property with a fair market value of $180,000 as compensation for the property taken. a. What is Camilo’s realized and recognized gain? b. What is the basis

> Andrew owns a lathe (adjusted basis of $40,000) that he uses in his business. He exchanges the lathe and $20,000 in cash for a new lathe worth $50,000. May Andrew avoid like-kind exchange treatment to recognize his realized loss of $10,000? Explain.

> Juliana purchased land three years ago for $50,000. She gave the land to Tom, her brother, in the current year, when the fair market value was $70,000. No gift tax is paid on the transfer. Tom subsequently sells the property for $63,000. a. What is Tom’s

> Sebastian purchases two pieces of equipment for $100,000. Appraisals of the equipment indicate that the fair market value of the first piece of equipment is $72,000 and that of the second piece of equipment is $108,000. What is Sebastian’s basis in these

> Sarah exchanges a yellow bus (used in her business) for Tyler’s gray bus and some garage equipment (used in his business). The assets have the following characteristics: a. What are Sarah’s recognized gain or loss an

> Mike, an attorney, earns $200,000 from his law practice and receives $45,000 in dividends and interest during the year. In addition, he incurs a loss of $50,000 from an investment in a passive activity acquired three years ago. What is Mike’s net income

> Luciana, a nonshareholder, purchases a condominium from her employer for $85,000. The fair market value of the condominium is $120,000. What is Luciana’s basis in the condominium and the amount of any income as a result of this purchase?