Task: A number of specific transactions do not necessarily follow the general tax provision applicable to property transactions. Following are a group of transactions that are subject to specific tax provisions. For each of the situations, you are to answer the questions and cite the source for your answer.
Question 1: Martin, a securities dealer, bought 100 shares of Datacard stock on April 5 of year 5 for $10,500. Before the end of that day, he identified the stock as being held for investment purposes.
1. Never having held the stock for sale to customers, he sold the stock on May 22 of year 6 for $11,500. How much and what kind of gain or loss does he have?
2. Assume that later in year 5 he starts trying to sell the stock to customers and succeeds in selling it on May 1 of year 6 for $9,000. How much and what kind of gain or loss does he have?
Question 2: Ruth subdivided a piece of real estate she had owned for seven years into 12 lots. Each lot was apportioned a $ 10,000 basis. In year 2, she sold four lots for $ 15,000 a piece with selling expenses of $500 per lot.
1. How much and what kind of gain or loss does Ruth have?
2. If in year 3 she sold two more lots for $20,000 a piece and incurred selling expenses of $500 per lot, how much and what kind of gain or loss does she have?
Question 3: For 60 years, Shakia owned 1,000 acres of land in Kentucky on which coal was being mined under a royalty arrangement. Shakia received $164,000 in the current tax year in royalties. The coal's adjusted basis for depletion was $37,000. Determine the amount and type of gain Shakia realizes on the income.
4: Question Howard owned a large farm on which he raised a variety of farm animals. Determine the type of gain or loss he would realize on the following sales:
1) A six-month old calf
2) A one-and-one-half-year-old foal
3) Six-week-old chickens
4) A 6-year-old bull
5) A 12-year-old mare
6) Six-month-old lambs
7) A 2 year-old ram.