Question 1: Elaine exchanges a van that is used exclusively for business purposes for another van that also is used exclusively for business. The adjusted basis for the old van is $18,000 and its FMV is $14,500.
a. Calculate Elaines recognized gain or loss on the exchange.
b. Calculate Elaine's basis for the van she receives.
Question 2: Patti's garage (used to store business property) is destroyed by a fire. She decides not to replace it and uses the insurance proceeds to invest in her business. The garage had an adjusted basis of $50,000.
a. If the insurance proceeds total $20,000, what is Patti's recognized gain or loss?
b. If the insurance proceeds total $60,000, what is Patti's recognized gain or loss?
Question 3: Virginia is an accountant for a global CPA firm. She is being temporarily transferred from the Raleigh, North Carolina, office to Tokyo. She will leave Raleigh on October 7, 2009, and will be out of the country for four years. She sells her personal residence on September 30, 2009, for $250,000 (her adjusted basis is $190,000). Upon her return to the United States in 2013, she purchases a new residence in Los Angeles for $220,000, where she will continue working for the same firm.
a. What are Virginia's realized and recognized gain or loss?
b. What is Virginia's basis in the new residence?
Question 4: On January 1, 2009, Myron sells stock that has a $50,000 FMV on the date of the sale (basis $75,000) to his son Vernon. On October 21,2009, Vernon sells the stock to an unrelated party. In each of the following, determine the tax consequences of these transactions to Myron and Vernon"
a. Vernon sells the stock for $40,000.
b. Vernon sells the stock for $80,000.
c. Vernon sells the stock for $65,000.