Questions -
Q1. In 2011, Linda sold her personal residence to Tom for $300,000. Before the sale, Linda paid the real estate taxes of $8,030 for the calendar year. For income tax purposes, the deduction is apportioned as follows: $4,400 to Linda and $3,630 to Tom.
a. What is Tom's basis in the residence?
b. What is Linda's amount realized from the sale of the residence?
c. What amount of real estate taxes can Tom deduct?
d. What amount of real estate taxes can Linda deduct?
Q2. Freda, who has AGI of $100,000 in 2011, contributes stock in Tulip Corporation (a publicly traded corporation) to Central State University, a qualified charitable organization. The stock is worth $59,000, and Freda acquired it as an investment two years ago at a cost of $44,000.
a. What is the total amount that Freda can deduct as a charitable contribution, assuming she carries over any disallowed contribution from 2011 to future years?
b. What is the maximum amount that Freda can deduct as a charitable contribution in 2011?
c. What factors should Freda consider in deciding how to treat the contribution for Federal income tax purposes?
d. Assume Freda dies in December 2011. What advice would you give the executor of her estate with regard to possible elections that can be made relative to the contribution?
Q3. Theresa and Oliver, married filing jointly, and both over 65 years of age, have no dependents. Their 2011 income tax facts are:
Theresa's wages - $145,000
Oliver's wages - 33,000
Short-term capital gain - 36,000
Long-term capital loss - (47,000)
What is their taxable income for 2011?
Q4. On January 18, 2010, Martha purchased 200 shares of Blue Corporation stock for $2,000. On November 11, 2011, she sold short 200 shares of Blue Corporation stock which she borrowed from her broker for $2,300. On February 10, 2012, Martha closed the short sale by delivering the 200 shares of Blue Corporation stock which she had acquired in 2010. On that date, Blue Corporation stock had a market price of $4 per share. What is Martha's recognized gain or loss and its character in 2011? In 2012?
Q5. The chart below details Sheen's 2009, 2010, and 2011 stock transactions. What is the capital loss carryover to 2011 and what is the net capital gain or loss for 2011?
|
Tax Year
|
Short-term Capital Gains
|
Short-term Capital Losses
|
Long-term Capital Gains
|
Long-term Capital Losses
|
|
2009
|
$ 4,000
|
$ 6,000
|
$ 2,000
|
$13,000
|
|
2010
|
$16,000
|
$14,000
|
$23,000
|
$28,000
|
|
2011
|
$55,000
|
$52,000
|
$67,000
|
$33,000
|
Q6. Martha is single with one dependent and files as head of household. She had 2011 taxable income of $45,000 which included $16,000 of 0%/15% net long-term capital gain. What is her tax on taxable income using the alternative tax on net long-term capital gain method?
Q7. Harold is a head of household, has $27,000 of taxable income in 2011 from non-capital gain or loss sources, and has the following capital gains and losses:
28% long-term capital gain - $ 4,300
28% long-term capital loss - (2,000)
0%/15% long-term capital gain - 19,000
Short-term capital loss - (1,700)
What is Harold's taxable income and the tax on that taxable income?
Q8. Robert sold his ranch which was his principal residence during the current taxable year. At the date of the sale, the ranch had an adjusted basis of $460,000 and was encumbered by a mortgage of $200,000. The buyer paid him $500,000 in cash, agreed to take the title subject to the $200,000 mortgage, and agreed to pay him $100,000 with interest at 6 percent one year from the date of sale. How much is Robert's recognized gain on the sale?
Q9. Ollie owns a personal use car for which he originally paid $42,000. He trades the car in on a sports utility vehicle (SUV) paying the automobile dealer cash of $24,000. If the negotiated price of the SUV is $45,000, what is Ollie's recognized gain or loss and his adjusted basis for the SUV?
Q10. Elbert gives stock worth $28,000 (no gift tax resulted) to his friend, Jeff, on June 8, 2011. Elbert purchased the stock on September 1, 2004, and his adjusted basis is $22,000. Jeff dies on December 8, 2012, and bequeaths the stock to Elbert. At that date, the fair market value of the stock is $31,000.
a. What is Jeff's basis and holding period for the stock?
b. What is Elbert's basis and holding period for the stock?
Q11. Laura transfers her personal use automobile to her business (a sole proprietorship). The car's adjusted basis is $32,000 and the fair market value is $20,000. No cost recovery had been deducted by Laura, since she held the car for personal use. Determine the adjusted basis of the car to Laura's sole proprietorship including the basis for cost recovery.
Q12. For each of the following involuntary conversions, determine if the property qualifies as replacement property.
a. Chuck's restaurant building is destroyed by fire. He clears the site and builds another restaurant building.
b. Diane's warehouse which she used for storing inventory is destroyed by a tornado. She purchases another warehouse in which she will store inventory.
c. Part of Andrew's dairy farm land is condemned to make way for an interstate highway. He uses the condemnation proceeds to construct a barn to be used for storing cattle feed.
d. Liz owns a shopping mall which is destroyed by a flood. Since the tenant occupancy rate was down, she uses the insurance proceeds to purchase an office building which she will rent to tenants.
e. Eleanor's Maserati Gran Turismo is stolen. The original cost was $125,000, and she had used it exclusively for personal use. Due to the limited supply of this model, it had appreciated in value. Eleanor received insurance proceeds of $130,000 and uses the proceeds to purchase a replacement Gran Turismo.
Q13. Lucinda, a calendar year taxpayer, owned a rental property with an adjusted basis of $215,000 in a major coastal city. When her property was condemned by the city government on November 5, 2011, in order to build a convention center, Lucinda eventually received qualified replacement property from the city government on February 5, 2012. This new property has a fair market value of $350,000.
a. What is Lucinda's recognized gain or loss on the condemnation?
b. What is her adjusted basis for the new property?
c. What is the latest date that Lucinda can acquire qualifying replacement property?
Q14. On January 5, 2011, Bill sells his principal residence with an adjusted basis of $212,000 for $550,000. He has owned and occupied the residence for 18 years. He pays $30,000 in commissions and $2,000 in legal fees in connection with the sale. One month before the sale, Bill painted the exterior of the house at a cost of $5,000 and repaired various items at a cost of $3,000. On October 15, 2011, Bill purchases a new home for $525,000. On November 15, 2012, he pays $25,000 for completion of a new room on the house, and on January 14, 2013, he pays $15,000 for the construction of a pool. What is the Bill's recognized gain on the sale of his old principal residence and what is the basis for the new residence?
Q15. Walter owns stock in Target, Inc. (adjusted basis of $50,000) which he sells for $70,000 on March 21, 2011. On May 1, 2011, he uses the $70,000 to acquire stock in Lime, Inc., a specialized small business investment company. Calculate Walter's recognized gain on the sale of the Target stock and his basis in the stock acquired.