Principles of Taxation for Business and Investment Planning 2020 Edition
23rd Edition
ISBN: 9781260433210
Author: Jones, Sally
Publisher: MCGRAW-HILL HIGHER EDUCATION
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 9, Problem 7AP
This year, Neil Inc. exchanged a business asset for an investment asset. Both assets had a $932,000 appraised FMV. Neil’s book basis in the business asset was $604,600, and its tax basis was $573,000.
- a. Compute Neil’s book gain and tax gain assuming the exchange was a taxable transaction.
- b. Determine Neil’s book and tax basis of the investment asset acquired in the taxable exchange.
- c. Compute Neil’s book gain and tax gain assuming the exchange was a nontaxable transaction.
- d. Determine Neil’s book and tax basis of the investment asset acquired in the nontaxable exchange.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Business K exchanged an old asset (FMV $95,000) for a new asset (FMV $95,000). Business K's tax basis in the old asset was
$113,000.
Required:
a. Compute Business K's realized loss, recognized loss, and tax basis in the new asset assuming the exchange was a taxable
transaction.
b. Compute Business K's realized loss, recognized loss, and tax basis in the new asset, assuming the exchange was a nontaxable
transaction.
c. Six months after the exchange, Business K sold the new asset for $103,000 cash. How much gain or loss does Business K
recognize if the exchange was taxable? How much gain or loss if the exchange was nontaxable?
Complete this question by entering your answers in the tabs below.
Required A Required B Required C
Compute Business K's realized loss, recognized loss, and tax basis in the new asset assuming the exchange was a taxable
transaction.
Note: Losses should be indicated with a minus sign.
Realized loss
Recognized loss
Tax basis
Amount
This year, Neil Incorporated exchanged a business asset for an investment asset. Both assets had a $932,000 appraised FMV. Neil’s book basis in the business asset was $604,600, and its tax basis was $573,000. Three years after the exchange, Neil sold the investment asset for $1,000,000 cash.
Required:
Compute Neil’s book gain and tax gain on sale assuming Neil acquired the investment asset in a taxable exchange.
Compute Neil’s book gain and tax gain on sale assuming Neil acquired the investment asset in a nontaxable exchange.
LiO Company transferred an old asset with a $13,600 adjusted tax basis in exchange for a new asset worth $11,000 and $1,500 cash. Which of the following statements are true?
a) If the exchange is taxable, LiO recognizes an $1,100 loss.
b) If the exchange is nontaxable, LiO recognizes no loss.
c) If the exchange is nontaxable, LiO’s tax basis in the new asset is $12,100
d) If the exchange is nontaxable, LiO recognizes a $1,500 Loss
Chapter 9 Solutions
Principles of Taxation for Business and Investment Planning 2020 Edition
Ch. 9 - Prob. 1QPDCh. 9 - Prob. 2QPDCh. 9 - Prob. 3QPDCh. 9 - Prob. 4QPDCh. 9 - Prob. 5QPDCh. 9 - Prob. 6QPDCh. 9 - Prob. 7QPDCh. 9 - Prob. 8QPDCh. 9 - Prob. 9QPDCh. 9 - Explain the difference between a substituted basis...
Ch. 9 - Prob. 11QPDCh. 9 - Prob. 12QPDCh. 9 - Prob. 13QPDCh. 9 - Prob. 14QPDCh. 9 - Prob. 15QPDCh. 9 - Prob. 1APCh. 9 - Prob. 2APCh. 9 - Prob. 3APCh. 9 - Prob. 4APCh. 9 - Prob. 5APCh. 9 - Prob. 6APCh. 9 - This year, Neil Inc. exchanged a business asset...Ch. 9 - Prob. 8APCh. 9 - Prob. 9APCh. 9 - XYZ exchanged an old building for a new like-kind...Ch. 9 - Prob. 11APCh. 9 - Prob. 12APCh. 9 - Prob. 13APCh. 9 - Prob. 14APCh. 9 - Prob. 15APCh. 9 - Prob. 16APCh. 9 - Prob. 17APCh. 9 - Prob. 18APCh. 9 - Prob. 19APCh. 9 - On October 18 of last year, a flood washed away...Ch. 9 - Prob. 21APCh. 9 - Prob. 22APCh. 9 - Prob. 23APCh. 9 - Mr. ZJ owns a sole proprietorship. The business...Ch. 9 - Prob. 25APCh. 9 - Prob. 26APCh. 9 - Prob. 27APCh. 9 - Prob. 28APCh. 9 - Prob. 29APCh. 9 - Prob. 30APCh. 9 - Prob. 31APCh. 9 - Prob. 32APCh. 9 - Prob. 33APCh. 9 - Prob. 34APCh. 9 - Prob. 1IRPCh. 9 - Prob. 2IRPCh. 9 - Prob. 3IRPCh. 9 - Prob. 4IRPCh. 9 - Prob. 5IRPCh. 9 - Prob. 6IRPCh. 9 - Prob. 7IRPCh. 9 - Prob. 8IRPCh. 9 - Prob. 9IRPCh. 9 - Prob. 10IRPCh. 9 - Prob. 1RPCh. 9 - Prob. 2RPCh. 9 - Prob. 3RPCh. 9 - Prob. 1TPCCh. 9 - Prob. 2TPCCh. 9 - Prob. 3TPCCh. 9 - Croyden is a calendar year, accrual basis...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Tesco Incorporated and WW Company exchanged like-kind assets. Tesco's asset had an $82,000 FMV and $55,900 adjusted tax basis, and WW's asset had an $85,500 FMV and a $27,200 adjusted tax basis. Tesco paid $8,500 cash to MW as part of the exchange. Calculate a) WW's and Tesco's realized and recognized gain b) WW's and Tesco's basis for newly acquired assetarrow_forwardSissoon Inc exchanged a business asset for an investment asset Both assets had a $620,000 appraised FMV Sisoons book basis in the business asset was $518,900 and it's tax basis was $443,400. Compute Sissoons book and tax gain if the business asset and investment asset were like-kind properties for tax purposes Determine Sissoons book and tax basis of the investment asset acquired in the non taxable exchange properties for tax purposes. compute Sissoons book and tax gain if the business asset and investment asset were not like king properties for tax purposes. Determine Sissoon's book and tax basis of the investment asset aquired in the taxable exchange.arrow_forwardThe company has the opportunity to engage in a transaction that will generate a total cash of $180,000 that will be considered a taxable income in the year received. Pioneer will receive $100,000 in year 0 and $80,000 in year 1. The company has the option to restructure the above transaction and receive $107,500 in year 0 and $80,000 in year 1. However, Pioneer should recognize the total amount received as a taxable income in year 0. The company’sinvestment manager rejected the restructure of the above proposal. Assume the company uses 8% discount rate and has a marginal tax rate of 35%. Do you agree with the investment manager decision? Assuming you disagree, provide the appropriate calculations and explain your recommendationarrow_forward
- Firm M exchanged an old asset with a $16,600 tax basis and a $39,000 FMV for a new asset worth $27,500 and $11,500 cash. Required: a. If the exchange is nontaxable, compute Firm M's realized and recognized gain and tax basis in the new asset. b. How would your answers change if the new asset were worth only $16,000, and Firm M received $23,000 cash in the exchange? Complete this question by entering your answers in the tabs below. Required A Required B If the exchange is nontaxable, compute Firm M's realized and recognized gain and tax basis in the new asset. Amount Realized gain Recognized gain Tax basisarrow_forwardPrater Incorporated enters into an exchange in which it gives up its warehouse on 10 acres of land and receives a tract of land. A summary of the exchange is as follows: What are Prater's realized and recognized gain on the exchange and its basis in the assets it received in the exchange? Answer is complete but not entirely correct. Prater Incorporated enters into an exchange in which it gives up its warehouse on 10 acres of land and receives a tract of land. A summary of the exchange is as follows: Transferred Warehouse Land Mortgage on warehouse Cash Assets Received Land FMV $ 432,500 Original Basis Accumulated Depreciation $ 278,000 $ 55,500 55,000 55,000 63,750 21,000 21,000 FMV $ 444,750 What are Prater's realized and recognized gain on the exchange and its basis in the assets it received in the exchange? Answer is complete but not entirely correct. Description Realized gain Amount $ 167,250 Recognized gain $ 84,750 x Adjusted basis in new property $ 278,000arrow_forwardin the current year, Keyaki Construction Company exchanged a building, which cost $530,000 and had accumulated depreciation of $160,000, for a new building having a fair market value of $650,000 In connection with the exchange, Keyaki paid $280,000 in cash. What is the tax basis of the new building?arrow_forward
- In its first year, Firm KZ recognized $457,500 ordinary business income and a $13,250 loss on the sale of an investment asset. In its second year, Firm KZ recognized $518,000 ordinary business income, a $20,350 Section 1231 gain, and a $8,070 Section 1231 loss on two sales of operating assets. Required: a. Compute KZ's book and taxable income for its first year. b. Using a 21 percent tax rate, compute KZ's deferred tax asset or liability (identify which) on its balance sheet on the last day of the year. c. Compute KZ's book and taxable income for its second year. d. Compute KZ's deferred tax asset or liability (identify which) on its balance sheet on the last day of the second year. Answer is not complete. Complete this question by entering your answers in the tabs below. Req A and B Req C and D c. Compute KZ's book and taxable income for its second year. d. Compute KZ's deferred tax asset or liability (identify which) on its balance sheet on the last day of the second year. Note:…arrow_forwardIn year 1, Firm A paid $49,000 cash to purchase a tangible business asset. In year 1 and year 2, it deducted $3,040 and $6,600 depreciation with respect to the asset. Firm A's marginal tax rate in both years was 21 percent. Required: a. Compute Firm A's net cash flow attributable to the asset purchase in each year. b. Compute Firm A's adjusted basis in the asset at the end of each year. Complete this question by entering your answers in the tabs below. Required A Required B Compute Firm A's net cash flow attributable to the asset purchase in each year. Note: Cash outflows should be indicated by a minus sign. Round your intermediate calculations and final answers to nearest whole dollar amount. Before-tax cash flows Tax (cost) or savings Net cash flow Year 1 Year 2arrow_forwardBeckett Corporation has nexus with States A and B. Apportionable income for the year totals $1,190,000 . Beckett's apportionment factors for the year use the following data. Compute Beckett's B taxable income for the year; B uses a three-factor apportionment formula with a double-weighted sales factor. State AState BTotalSales$1,428,000$856,800$2,284,800Property$238,000$0 $238,000Payroll$357,000$0 $357,000arrow_forward
- Firm M exchanged an old asset with a $11, 500 tax basis and a $29, 000 FMV for a new asset worth $ 22,500 and $6,500 cash. Required: If the exchange is nontaxable, compute Firm M's realized and recognized gain and tax basis in the new asset. How would your answers change if the new asset were worth only $ 11,000, and Firm M received $18,000 cash in the exchange?arrow_forwardThis year, PRS Corporation generated $300,000 income from the performance ofconsulting services for its clients. It sold two assets during the year, recognizing a$36,000 gain on the first sale and a $49,000 loss on the second sale. Compute PRS’staxable income assuming that:Required:a.Both the gain and the loss were capital.b. Both the gain and the loss were ordinary.c. The gain was ordinary, and the loss was capital.d. The gain was capital, and the loss was ordinary.arrow_forwardParker Company identifies depreciation as the only difference for future taxable amounts. In Year 1, its depreciation for financial reporting purposes is $9,000 and $10,500 for income tax reporting purposes. Parker has an income tax rate of 35%. Assume that Parker’s taxable income for Year 1 is $150,000. Required: Prepare the journal entry to record Parker’s income tax expense.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Operating Loss Carryback and Carryforward; Author: SuperfastCPA;https://www.youtube.com/watch?v=XiYhgzSGDAk;License: Standard Youtube License