Homework 5 Solution

Tax 4001 Spring 2011 Homework readiness 5 reply PAGE 1 1 a) Amount effected$37,500 hind end(45,000) Real Loss(7,500) accepted Loss$0 because individual(prenominal) use asset c. The real disadvantage is $0. b) Same as (a). Like-kind exchange rules do non apply to personal-use assets c)Her accepted dismission is $0. Since the form of the transaction is a theft, the recognized breathing out is the lesser of the adjusted hind end or the true(p) grocery store value of the asset, trim back by the insurance proceeds that she received (see Chapter 6).Therefore, the opportunity for the theft wrong deduction on personal use property is not bring in in this case because the insurance proceeds received of $37,500 equal the beauteous market value of $37,500. 2 a. amt realized$65,000 passing game keister 76,000 recognise Loss(11,000) b. $0. The proceeds of $68,000 are between the take up tooshie of $80,000 and the loss basis of $60,000. Therefore, neither gain nor loss is recognized. 3 a. $225,000 b. $200,000 (note only the create finish be underestimated) c. $225,000 keister for the gain is adjusted basis d. She would be meliorate off to sell the house and buy another one.Because the house is her personal residence, she could exclude the gain on sale. Then she would be able to depreciate the unsanded house at a higher basis 4 a. Amt. established$265,000 Adj Basis 175,000 Real Gain90,000 b. Recoginzed Gain is $65,000 which is the less of realized gain or iron heel received. c. Adjusted basis of Land $175,000 Gain recognize 65,000 guardianship (65,000) Adj Basis of Building 175,000 . Tax 4001 Spring 2011 Homework Set 5 ancestor PAGE 2 . 5 Amt. Realized$1,235,000 125000 + 900000 + 210000 little Basis of Apt850,000 Real Gain 385,000 b. Recog Gain$335,000 Cash plus owe Postponed Gain$50,000 . Basis of Apt Bldg $850,000 + gain recognized 335,000 little Boot received (335,000) Basis of Office Bldg $850,000 6 terms $200,000 Legal Fees $21 ,500 Streets and Sewers $700,000 Basis $921,500 7 Basis b4 casualty$10,000 Insurance proceeds 13,500 Casualty Gain3,500 Basis after insurance 8 FIFO method used to delineate which shares were sold, therefore Tommy Is treated as having sold 100 of the shares he purchased on 10/16/06 Per Share Basis = $7500/125 shares = $ X form of Shares Sold (100) =$ 60 6,000 per share Basis of Shares Sold Sales Procceds 18,000 Less Basis (6,000)LTCG $ 12,000 Tax 4001 Spring 2011 Homework Set 5 reply PAGE3 30. a. Realized gain- $9,000 ($12,000 fair market value of raw asset+ $4,000 boot received)-$7,000 adjusted basis of old asset. Recognized gain= $4,000. Postponed gain= $5,000. forward-looking basis= $7,000 ($12,000 fair market value of new asset- $5,000 postponed gain). b. Realized loss = $1,000. Recognized loss= $-0-. Postponed loss= $1,000. red-hot basis= $16,000 ($15,000 fair market value of new asset+ $1,000 postponed loss). c. Realized loss = $1,500. Recognized loss= $-0-. Postponed loss= $1,500. New basis= $9,500 ($8,000 fair market value of new asset+ $1,500 postponed loss). d. Realized gain= $10,000. Recognized gain = $-0-. Postponed gain= $10,000. New basis = $22,000 ($32,000 fair market value of new asset $10,000 postponed gain). e. Realized gain = $2,000. Recognized gain= $1,000. Postponed gain= $1,000. New basis= $10,000 ($11,000 fair market value of new asset- $1,000 postponed gain). f. Realized loss = $2,000. Recognized loss= $-0-. Postponed loss= $2,000. New basis= $10,000 ($8,000 fair market value of new asset+ $2,000 postponed loss). Tax 4001 Spring 2011 Homework Set 5 Solution PAGE4 32. a. Since the owner is an owner-investor, the taxpayer use test applies. Replacing the storage warehouse that is rented to various tenants with a shopping mall that is rented to various tenants in a antithetic lieu qualifies as replacement property. Amount realized Adjusted basis Realized gain $ 700,000 ( 470,000) $ 230,000 Recognized gain $ -0- The basis for the replacement property is Cost Postponed gain Basis $ 700,000 (230,000) $ 470000 b. Since the owner is an owner-user, the operable use test applies.Replacing the warehouse used in his business with another warehouse in a different state which is to be used in his business qualifies as replacement property under the functional use test. Amount realized Adjusted basis Realized gain Recognized gain $ 400,000 (300,000) $ 100,000 $ -0- The basis for the replacement property is Cost Postponed gain Basis $ 400,000 (100,000) $ 300,000 c. Since Swallow was an owner-user of the building, the functional use test applies. Thus, Swallows use of the replacement property and of the involuntarily born-again property must be the same.Since Swallows use of the four-unit apartment building is different from the use of the building in its retail business, the apartment building does not qualify as replacement property. Amount realized Adjusted basis Realized gain Recognized gain $ 300,000 (250,000) $ 50,000 $ 50,000 The basis for the apartment building is its cost of $300,000. d. Not qualified replacement property because they are owner-users so functional-use test applies. Thus they must recognize their realized gain of $30,000 and their basis in the duplex is $200,000.