Question

5. Joseph exchanged farmhouse that he used in his farming business for a building used by Sandy in her motorcycle manufacturing business. The farmhouse had a FMV of $345,000 and cost $285,000. The allowable depreciation was $45,000, but because of an error, Joseph only took $25,000 of depreciation. The building had a FMV of $275,000 and an adjusted basis of $315,000. Because the building was expected to increase in value rapidly, Sandy only gave Joseph $45,000 cash. What is Joseph's realized gain or loss? a. $80,000 Gain b. $35,000 Gain c. $105,000 Gain d. $45,000 Gain c. None of the above 6. Assume the same fact as in question 5 above, what is Sandy's recognized gain of loss? a. $30,000 Gain b. $40,000 Gain c. $45,000 Gain d. $0 e. None of the above George purchased stock in 2015 for $15.500. He gave the stock to his son, William, in 2017. On the date of the gift the FMV of the stock was $11,500 and no gift tax was paid on the transfer. William later sold the stock for 58,000. What is William's recognize gain or loss on the sell of the stock: a. Loss of $4,000 b. Gain of $8,000 c. Loss of $3,500 d. Loss of $7,500 e. None of the above 8. For the current year, David has salary income of $100,000 and the following property transactions: Stock investment sales- Long-term capital gain Short-term capital loss Gain on sale of camper (purchased 4 years ago and used for family vacations) $ 7,000 (16,000) 3,000 What is David's AGI for the current year? a $100,000 $110,000 $97,000 $94,000 e. None of the above. d.

Answer 1

5) Joseph's realised gain or loss can be calculated only on details regarding appreciation of building is available. There is a loss on exchange of $ 25000 (345000 - 275000 - 45000). However the loss is expected to be compensated by future appreciation in value of building. Even if we consider the cost of farmhouse less depreciation to calculate the realised gain / loss, the gain works out to 60000 (275000 + 45000 - (285000 - 25000)) Answer is e.

6) Sandy has incurred a loss on exchange on cost basis (315000+45000-345000) = 15000 loss. On fair value basis, the gain cannot be calculated as information of future appreciation of building is not available. Hence the answer is e.

7) George paid $15500 for the stock. William sold for $ 8000. Hence the realised loss on sale of stock = $ 7500. Answer is d.

8) AGI = 100000 + 7000 - 16000 + 3000 = $ 94000. Answer is d.