PRINCIPLES OF TAXATION F/BUS.+INVEST.
22nd Edition
ISBN: 9781259917097
Author: Jones
Publisher: MCG
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Chapter 8, Problem 8QPD
Mrs. Carly called her accountant with a question. She is planning to sell nine acres of land for $380,000 cash. She purchased the land eight years ago for $195,000. She asked her accountant if her gain on sale would be a
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Bernadette sold her home. She received cash of $40,000, the buyer assumed her mortgage of $180,000, and she paid closing costs of $2,300 and a broker’s commission of $7,000.
What is the amount realized on the sale?
If she has a basis in the home of $138,000, what is her realized gain or loss on the sale?
What is the character of the recognized gain or loss?
How would your answer to (c) change if Bernadette sold a building used by her sole proprietorship rather than her personal residence?
Kase, an individual, purchased some property in Potomac, Maryland, for $150,000 approximately 10 years ago. Kase is approached by a real estate agent representing a client who would like to exchange a parcel of land in North Carolina for Kase’s Maryland property. Kase agrees to the exchange.
What is Kase’s realized gain or loss, recognized gain or loss, and basis in the North Carolina property in each of the following alternative scenarios? (Loss amounts should be indicated by a minus sign. Leave no answer blank. Enter zero if applicable.)
a. The transaction qualifies as a like-kind exchange, and the fair market value of each property is $675,000.
Olivia wishes to purchase some undeveloped land for investment purposes. She is unable to pay the whole purchasing price. Instead, Olivia pays the landowner $51,900 in exchange for the right to purchase the land for $1,038,000 at any time over the following four years. Olivia sells the option for $64,875, 14 months after obtaining it. What is the size and nature of Olivia's gain or loss?
She has a $ lengthy capital gain.
Chapter 8 Solutions
PRINCIPLES OF TAXATION F/BUS.+INVEST.
Ch. 8 - BBB Company, which manufactures industrial...Ch. 8 - Prob. 2QPDCh. 8 - Prob. 3QPDCh. 8 - Prob. 4QPDCh. 8 - Does the characterization of gain or loss as...Ch. 8 - Distinguish between a firms tax basis in an asset...Ch. 8 - Both Corporation A and Corporation Z have business...Ch. 8 - Mrs. Carly called her accountant with a question....Ch. 8 - Prob. 9QPDCh. 8 - Mr. K realized a loss on the sale of an asset to...
Ch. 8 - Prob. 11QPDCh. 8 - Prob. 12QPDCh. 8 - Prob. 13QPDCh. 8 - Prob. 14QPDCh. 8 - Prob. 1APCh. 8 - Several years ago, PTR purchased business...Ch. 8 - Prob. 3APCh. 8 - Prob. 4APCh. 8 - Prob. 5APCh. 8 - Prob. 6APCh. 8 - TPW, a calendar year taxpayer, sold land with a...Ch. 8 - Refer to the facts in the preceding problem and...Ch. 8 - Refer to the facts in problem 7. In the first year...Ch. 8 - Prob. 10APCh. 8 - Prob. 11APCh. 8 - In year 1, Aldo sold investment land with a 61,000...Ch. 8 - Prob. 13APCh. 8 - Prob. 14APCh. 8 - Silo Inc. sold investment land to PPR Inc. for...Ch. 8 - Prob. 16APCh. 8 - Prob. 17APCh. 8 - Prob. 18APCh. 8 - Shenandoah Skies is the name of an oil painting by...Ch. 8 - Koil Corporation generated 718,400 ordinary income...Ch. 8 - Prob. 21APCh. 8 - Alto Corporation sold two capital assets this...Ch. 8 - Prob. 23APCh. 8 - Prob. 24APCh. 8 - Prob. 25APCh. 8 - Firm OCS sold business equipment with a 20,000...Ch. 8 - Prob. 27APCh. 8 - Prob. 28APCh. 8 - This year, QIO Company generated 192,400 income...Ch. 8 - Prob. 30APCh. 8 - Prob. 31APCh. 8 - Since its formation, Roof Corporation has incurred...Ch. 8 - Prob. 33APCh. 8 - Prob. 34APCh. 8 - Firm P, a noncorporate taxpayer, purchased...Ch. 8 - Prob. 36APCh. 8 - Prob. 37APCh. 8 - Prob. 38APCh. 8 - A taxpayer owned 1,000 shares of common stock in...Ch. 8 - Prob. 40APCh. 8 - Prob. 41APCh. 8 - Prob. 42APCh. 8 - Prob. 43APCh. 8 - A fire recently destroyed a warehouse owned by...Ch. 8 - Prob. 45APCh. 8 - Bali Inc. reported 605,800 net income before tax...Ch. 8 - Prob. 47APCh. 8 - Prob. 48APCh. 8 - Prob. 49APCh. 8 - Prob. 1IRPCh. 8 - Prob. 2IRPCh. 8 - Prob. 3IRPCh. 8 - Prob. 4IRPCh. 8 - Prob. 5IRPCh. 8 - Prob. 6IRPCh. 8 - Firm WD sold depreciable realty for 225,000. The...Ch. 8 - Prob. 8IRPCh. 8 - Prob. 9IRPCh. 8 - Prob. 10IRPCh. 8 - Prob. 11IRPCh. 8 - For the past 12 years, George Link has operated...Ch. 8 - Prob. 2RPCh. 8 - Prob. 3RPCh. 8 - Prob. 4RPCh. 8 - Firm Z, a corporation with a 21 percent tax rate,...Ch. 8 - Mr. RH purchased 30 acres of undeveloped ranch...Ch. 8 - Prob. 3TPCCh. 8 - Prob. 4TPCCh. 8 - Prob. 5TPC
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- Brian purchased a block of land in June 1987 for $110,000. At the time that he acquired the land he did not anticipate selling it in the near future. He purchased and held the land because he considered that the land represented a safe investment for his money and that generally land prices went up with inflation. Brian sold the land for $250,000 in the current income year. Which of the following statements about Brian is most correct? a. The amount is not ordinary income but may be assessed under the capital gains provisions. b. The entire $250,000 is ordinary income. c. Section 15-15 ITAA97 will apply to make the amount of $140,000 assessable income. d. Section 25A ITAA36 will apply to make the amount of $140,000 assessable income.arrow_forwardKase, an individual, purchased some property in Potomac, Maryland, for $228,000 approximately 10 years ago. Kase is approached by a real estate agent representing a client who would like to exchange a parcel of land in North Carolina for Kase’s Maryland property. Kase agrees to the exchange.What is Kase’s realized gain or loss, recognized gain or loss, and basis in the North Carolina property in each of the following alternative scenarios? (Loss amounts should be indicated by a minus sign. Leave no answer blank. Enter zero if applicable.) a. The transaction qualifies as a like-kind exchange and the fair market value of each property is $770,000.arrow_forwardKase, an individual, purchased some property in Potomac, Maryland, for $155,000 approximately 10 years ago. Kase is approached by a real estate agent representing a client who would like to exchange a parcel of land in North Carolina for Kase's Maryland property. Kase agrees to the exchange. What is Kase's realized gain or loss, recognized gain or loss, and basis in the North Carolina property in each of the following alternative scenarios? Note: Loss amounts should be indicated by a minus sign. Leave no answers blank. Enter zero if applicable. b. The transaction qualifies as a like-kind exchange, and the fair market value of each property is $115,000.arrow_forward
- Kase, an individual, purchased some property in Potomac, Maryland, for $155,000 approximately 10 years ago. Kase is approached by a real estate agent representing a client who would like to exchange a parcel of land in North Carolina for Kase's Maryland property. Kase agrees to the exchange. What is Kase's realized gain or loss, recognized gain or loss, and basis in the North Carolina property in each of the following alternative scenarios? Note: Loss amounts should be indicated by a minus sign. Leave no answers blank. Enter zero if applicable. a. The transaction qualifies as a like-kind exchange, and the fair market value of each property is $787,500.arrow_forwardKase, an individual, purchased some property in Potomac, Maryland, for $152,000 approximately 10 years ago. Kase is approached by a real estate agent representing a client who would like to exchange a parcel of land in North Carolina for Kase's Maryland property. Kase agrees to the exchange. What is Kase's realized gain or loss, recognized gain or loss, and basis in the North Carolina property in each of the following alternative scenarios? Note: Loss amounts should be indicated by a minus sign. Leave no answers blank. Enter zero if applicable. Problem 11-56 Part-b (Algo) b. The transaction qualifies as a like-kind exchange, and the fair market value of each property is $116,000.arrow_forwardOn September 30 of last year, Rex received some investment land from Holly as a gift. Holly’s adjusted basis was $50,000 and the land was valued at $40,000 at the time of the gift. Holly acquired the land five years ago. What is the amount and character of Rex’s recognized gain (loss) if he sells the land on May 12 this year at the following prices? (Enter NA if a situation is not applicable. Leave no answer blank. Enter zero if applicable.) a. $32,000 b. $70,000 c. $45,000arrow_forward
- An individual bought a piece of land for $50,000 as an investment. A few years later, the individual wants to sell the land. The individual has the land appraised and finds out it is only worth $45,000. The individual decides not to sell the land that year but paid $500 in appraisal fees. The land has a $15,000 mortgage on it, and the property tax bill is $250 for the year. What capital losses may this individual deduct when preparing taxes?arrow_forwardSix years ago, Donna purchased land as an investment. The land cost $150,000 and is now worth $480,000. Donna plans to transfer the land to Development Corporation, which will subdivide it and sell individual tracts. Development's income on the land sales will be ordinary in character. Read the requirements. Requirement a. What are the tax consequences of the asset transfer and land sales if Donna contributes the land to Development in exchange for all its stock? on the transfer of land to Development Corporation. Donna recognizes no gain or loss Development's basis in the land will be $ 150,000. All gain on the subsequent sales will be to Development. This alternative results in the pre-contribution gain post-contribution profit earned from subdividing the land ordinary income that accrued prior to Donna's transfer and the being taxed at a 21% tax rate. Requirement b. In what alternative ways can the transaction be structured to achieve more favorable tax results? Assume Donna's…arrow_forwardOn September 30 of last year, Rex received some investment land from Holly as a gift. Holly's adjusted basis was $50,000 and the land was valued at $40,000 at the time of the gift. Holly acquired the land five years ago. What are the amount and character of Rex's recognized gain (loss) if he sells the land on May 12 this year at the following prices? (Enter NA if a situation is not applicable. Leave no answer blank. Enter zero if applicable.) b. Land sold for $70,000 Amountarrow_forward
- Olivia wants to buy some vacant land for investment purposes. She cannot afford the full purchase price. Instead, Olivia pays the landowner $51,900 to obtain an option to buy the land for $1,038,000 anytime in the next four years. Fourteen months after purchasing the option, Olivia sells the option for $64,875. What is the amount and character of Olivia's gain or loss? She has a long-term capital gain of $ .arrow_forwardOn September 30 of last year, Rex received some investment land from Holly as a gift. Holly's adjusted basis was $50,000 and the land was valued at $40,000 at the time of the gift. Holly acquired the land five years ago. What are the amount and character of Rex's recognized gain (loss) if he sells the land on May 12 this year at the following prices? (Enter NA if a situation is not applicable. Leave no answer blank. Enter zero if applicable.) a. Land sold for $32,000 Amountarrow_forwardErin's bank foreclosed on her office building when she stopped making payments on her loan. The loan was secured by the building when she purchased it three years ago for $750,000. Erin's Form 1099-A is shown below. If the building is sold for the fair market value (FMV), how much of Erin's personal assets can the lender attempt to collect to satisfy the judgment? (Answer choices are below the image.) LENDER'S name, street address, city or town, state or province, country, ZIP or foreign postal code, and telephone no. OAK RIDGE BANK 301 AUSTIN STREET YOUR CITY, YS XXXXX (XXX) 555-5678 LENDER'S TIN XX-XXXXXXX BORROWER'S name ERIN HERNANDEZ Street address (including apt. no.) 308 VIRGINIA AVENUE CORRECTED (if checked) BORROWER'S TIN XXX-XX-XXXX Account number (see instructions) XXXXXXXX Form 1099-A (Rev. 1-2022) City or town, state or province, country, and ZIP or foreign postal code YOUR CITY, YS XXXXX (keep for your records) $615.000 $595,000 $20,000 OSO (None of Erin's personal…arrow_forward
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