Principles Of Taxation For Business And Investment Planning 2020 Edition
23rd Edition
ISBN: 9781259969546
Author: Sally Jones, Shelley C. Rhoades-Catanach, Sandra R Callaghan
Publisher: McGraw-Hill Education
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Chapter 7, Problem 4IRP
To determine
Identify the tax issues and state the issues in the form of a question.
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Fubu Corporation purchased a 5-acre tract of land in New Albany, Ohio for a building site for $500,000. The company demolished the old building at a cost of $18,000, but was able to sell scrap from the building for $1,000. The cost of title transfer was $800 and attorney fees for reviewing the contract was $1500. Property taxes paid were $4,000, of which $450 covered the period after the purchase date. The capitalized cost of the land is:
Samtech Manufacturing purchased land and building for $4 million. In addition to the purchase price, Samtech made the following expenditures in connection with the purchase of the land and building:
Title insurance
$16,000
Legal fees for drawing the contract
5,000
Pro-rated property taxes for the period after the acquisition
36,000
State transfer fees
4,000
An independent appraisal estimated the fair values of the land and building, if purchased separately, at $3.3 and $1.1 million, respectively. Shortly after the acquisition, Samtech spent $82,000 to construct a parking lot and $40,000 for landscaping.
Required:
Determine the initial valuation of each asset Samtech acquired in these transactions.
Samtech Manufacturing purchased land and a building for $4 million. In addition to the purchase price, Samtech made the following expenditures in connection with the purchase of the land and building:
Title insurance
$ 22,000
Legal fees for drawing the contract
8,000
Pro-rated property taxes for the period after acquisition
42,000
State transfer fees
4,600
An independent appraisal estimated the fair values of the land and building, if purchased separately, at $4 and $1 million, respectively. Shortly after acquisition, Samtech spent $88,000 to construct a parking lot and $46,000 for landscaping.
Required:
Determine the initial valuation of each asset Samtech acquired in these transactions.
Determine the initial valuation of each asset, assuming that immediately after acquisition, Samtech demolished the building. Demolition costs were $310,000 and the salvaged materials were sold for $9,000. In addition, Samtech spent $85,000 clearing and grading the land in preparation for…
Chapter 7 Solutions
Principles Of Taxation For Business And Investment Planning 2020 Edition
Ch. 7 - Prob. 1QPDCh. 7 - Assume that Congress enacted legislation requiring...Ch. 7 - Prob. 3QPDCh. 7 - To what extent do cost recovery deductions based...Ch. 7 - Can a firm have a negative tax basis in an asset?Ch. 7 - Prob. 6QPDCh. 7 - Corporation J manufactures electrical appliances....Ch. 7 - Identify the tax and nontax issues that firms must...Ch. 7 - Identify four possible differences in the...Ch. 7 - Prob. 10QPD
Ch. 7 - Prob. 11QPDCh. 7 - Prob. 12QPDCh. 7 - Prob. 13QPDCh. 7 - Prob. 14QPDCh. 7 - Prob. 15QPDCh. 7 - Prob. 16QPDCh. 7 - Prob. 17QPDCh. 7 - Prob. 18QPDCh. 7 - Prob. 1APCh. 7 - Assuming a 21 percent tax rate, compute the...Ch. 7 - Determine the tax basis of the business asset...Ch. 7 - ABC Company purchased business property several...Ch. 7 - Early this year, ZeZe Inc. paid a 52,000 legal fee...Ch. 7 - In year 1, Firm A paid 50,000 cash to purchase a...Ch. 7 - Prob. 7APCh. 7 - Hansen Company, a cash basis taxpayer, paid 50,000...Ch. 7 - In year 0, Jarmex paid 55,000 for an overhaul of a...Ch. 7 - Prob. 10APCh. 7 - Refer to the facts in problem 10. In its second...Ch. 7 - In its first year of operations, Lima Company...Ch. 7 - Prob. 13APCh. 7 - Herelt Inc., a calendar year taxpayer, purchased...Ch. 7 - Knute Company purchased only one asset during its...Ch. 7 - Prob. 16APCh. 7 - Suber Inc., a calendar year taxpayer, purchased...Ch. 7 - Prob. 18APCh. 7 - Prob. 19APCh. 7 - On May 12, 2018, Nelson Inc. purchased eight...Ch. 7 - In March 2018, Jones Company purchased a Mercedes...Ch. 7 - Margo, a calendar year taxpayer, paid 580,000 for...Ch. 7 - In 2019, Firm L purchased machinery costing 21,300...Ch. 7 - In 2018, Company W elected under Section 179 to...Ch. 7 - Prob. 25APCh. 7 - At the beginning of its 2019 tax year, Hiram owned...Ch. 7 - In April 2019, Lenape Corporation completed...Ch. 7 - Ajax Inc. was formed on April 25 and elected a...Ch. 7 - Prob. 29APCh. 7 - Mr. Z, a calendar year taxpayer, opened a new car...Ch. 7 - Prob. 31APCh. 7 - Prob. 32APCh. 7 - Prob. 33APCh. 7 - Prob. 34APCh. 7 - Prob. 35APCh. 7 - Prob. 36APCh. 7 - Prob. 37APCh. 7 - Prob. 1IRPCh. 7 - Prob. 2IRPCh. 7 - Prob. 3IRPCh. 7 - Prob. 4IRPCh. 7 - Prob. 5IRPCh. 7 - Prob. 6IRPCh. 7 - Prob. 7IRPCh. 7 - Prob. 8IRPCh. 7 - Prob. 9IRPCh. 7 - Prob. 10IRPCh. 7 - Prob. 1RPCh. 7 - Prob. 2RPCh. 7 - Prob. 3RPCh. 7 - Prob. 4RPCh. 7 - Prob. 1TPCCh. 7 - Prob. 2TPCCh. 7 - Prob. 3TPCCh. 7 - Prob. 4TPC
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