Question 1:
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 the buyer
c. A mortgage on the property is assumed by the seller
d. The buyer acquires the property subject to a mortgage of the seller
e. Stock that has a basis to the purchaser of $6,000 and a fair market value of $10,000 is received by the seller as part of the consideration.
Question 2:
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 bracket, while Fred's bracket is 25%. In either case, the holding period for the stock will be short-term. Identify the tax issues relevant to Simon in deciding whether to give the stock or the sale proceeds to Fred
Question 3:
Comment on the following transactions:
A) Mort owns 500 shares of Pear, Inc. stock with an adjusted basis of 22,000. On July 28, 2014, he sells 100 shares for 3,000. On August 16, 2014, he purchases another 100 shares for 3,400. Mort realized loss of 1,400 (3,000-4,400) on the July 28 sales not recognized, and his adjusted basis for the 100 shares purchased on the August 16 is 4,800. Explain.
B) How would you answer above change if Mort purchased the 100 shares on December 27, 2014 rather than on August 16, 2014?
Question 4:
Ira Cook is planning to make a charitable contribution to the Boy Scouts of Crystal, Inc. stocks worth $20000. The stock has an adjusted basis of $15000. A friend has suggested that Ira sell the stock and contribute the $20000 in proceeds rather than contribute the stock.
(a) Should Ira follow the freinds'' advice? Why or why not?
(b) Assume that the fair market value is only $13000. In this case, should Ira follow the freinds'' advice? Why or why not?
(c) Rather than make a charitable contribution to the Boy scouts, Ira is going to make a gift to Nancy, his niece. Advice Ira regarding (a) and (b).
(d) Write a letter to Ira regarding wether in (a) he should sell the stock and contribute the cash or contribute the stock. He has informed you that he purchased the stock six years ago. Ira''s address is 500 Ireland Avenue. Dekalb, IL 60115
Question 5:
Louis owns three pieces of land with an adjusted basis as follows: parcel A, $75,000; parcel B, $125,000; and parcel C, $175,000. Louis sells parcel A to his uncle for $50,000, parcel B to his partner for $120,000, and parcel C to his mother for $150,000.
a. What is the recognized gain or loss from the sale of each parcel?
b. If Louis`s uncle eventually sells his land for $90,000, what is his recognized gain or loss?
c. If Louis`s partner eventually sells his land for $130,000, what is his recognized gain or loss?
d. If Louis`s mother eventually sells her land for $165,000, what is her recognized gain or loss?