Hi,

I have several problems from my Basic Federal Tax class I would like to have reviewed. I have answered the problems but would like to have my calculations confimed.

My main area of confusion is when do you recognize a gain or loss

Thanks

~Mary

Chapter 11 Assignments 26.) Arnold Atkins purchased a residence for $160,000 on Sept. 26, 2013. In October 2014 he became ill and was confined to a nursing home. On October 8, 2015 he sold the residence for $245,000. How much gain can Arnold exclude? $250,000 x 13/24 = $135,416 Limit on excludable amt Realized Amt less Cost Realized Gain less Excludable amt Recognized Gain Income Tax Accounting 244 $ $ $ $ $ 245,000 (160,000) 85,000 (85,000) - 04/18/2017 Mary S. DeMarco Chapter 11 Assignments 44.) Peter Paterson transfers an apartment building with an adjusted basis of $160,000 and a FMV of $235,000 for Charlie Claussen's apartment building, adjusted basis $120,000 with a FMV $220,000 and cash of $55,000 from Charlie. Peter's mortgage of $45,000 is assumed by Charlie whose mortgage of $85,000 is assumed by Peter. What is the realized and recognized gain or loss for Peter and Charlie? What are their bases in their acquired buildings? Peter FMV of property received plus Cash Mortgage assumed by transferee less Mortgage assumed by Total consideration received less Adjusted Basis Gain Realized Gain Recognized $ $ $ $ $ $ $ $ FMV of property received $ less Deferred gain $ Basis new property $ $ $ $ $ $ $ $ $ Charlie 235,000 45,000 (85,000) 195,000 (120,000) 75,000 75,000 120,000 $ (100,000) $ 20,000 $ 235,000 235,000 220,000 55,000 85,000 (45,000) 315,000 (160,000) 155,000 55,000 45.) Chad Carter exchanged land with an adjusted basis of $100,000 and a FMV of $150,000 for Nash Nunn's land worth $140,000 (basis $120,000) and $15,000 cash. Chad's mortgage of $35,000 is assumed by Nash and Nash's mortgage of $40,000 is assumed by Chad What is Chad's realized and recognized gain/loss and the basis in his new land? What is Nash's realized and recognized gain/loss and the basis in his new land? Chad FMV of property received Mortgage assumed by Nash plus Cash received Mortgage assumed by Chad Total consideration received less Adjusted basis Gain Realized Gain Recognized $ $ $ $ $ $ $ $ FMV of property received $ less Deferred gain $ Basis new property $ Income Tax Accounting 244 140,000 35,000 15,000 (40,000) 150,000 (100,000) 50,000 15,000 $ $ Nash 150,000 (35,000) $ $ $ $ $ 40,000 155,000 (135,000) **** 20,000 - 140,000 $ (35,000) $ 105,000 $ 150,000 (20,000) 130,000 ****Adjusted Basis $ plus Cash given $ $ 120,000 15,000 135,000 04/18/2017 Mary S. DeMarco Chapter 11 Assignments 46.) Sidney Southern owned a restaurant which was condemned on November 20, 2014 On January 15, 2015 he received a condemnation award of $280,000. The adjusted basis of his restaurant was $120,000. He purchased another restaurant on March 17, 2015 for $300,000 a What is Sidney's lowest recognized gain or loss? Adjusted Basis $ 120,000 Condemnation Award $ 280,000 Realized Gain $ 160,000 Recognized Gain is deferred due to Replacement cost being greater than award What is his basis in the restaurant? Basis $ 300,000 less Deferred Gain $ (160,000) Adjusted Basis $ 140,000 b What would be the answer to (a) if the replacement cost was $240,000? Adjusted Basis Condemnation Award Realized Gain Recognized Gain $ $ $ $ 120,000 280,000 160,000 40,000 Replacement - Award What is his basis in the restaurant? Basis $ 240,000 less Deferred Gain $ (120,000) Adjusted Basis $ 120,000 c What is the last possible date on which Sidney could have purchased qualified replacement property? December 31, 2018 3yrs after the end if year in which the gain was first realized d What is the answer to (c) if the restaurant had been destroyed by fire instead of being condemned? December 31, 2017 2yrs after the end if year in which the gain was first realized 48.) The government condemns and seizes Gary Greene's business property in order to widen the interstate. His adjusted basis in the property is $160,000. Gary receives $50,000 from the government a What is the amt of Gary's realized and recognized gain or loss in this transaction? Adjusted Basis $ 160,000 Condemnation Award $ 50,000 Realized Loss $ (110,000) Recognized Loss $ (110,000) b What if the property is Gary's personal home? Adjusted Basis Condemnation Award Realized Loss Recognized Loss Income Tax Accounting 244 $ 160,000 $ 50,000 $ (110,000) $ (110,000) 04/18/2017 Mary S. DeMarco DEFINITION OF REALIZED GAIN OR LOSS Realized gain or loss is the difference between the amount realized (see 1110,015) from the sale or other disposition of property and the adjusted basis (see 11 10,025) at the time of sale or disposition. If the amount realized exceeds the adjusted basis, there is a realized gain. On the other hand, if the adjusted basis exceeds the amount realized, there is a realized loss. Code Sec. 1001(a); Reg. J. lOOI-I (a). The term "other disposition" is interpreted broadly and includes transactions such as tradeins, casualties, thefts, and condemnations. The term does not include a fluctuation in market value of an asset because me possibility for the taxpayer to gain or lose value of an asset still exists and no identifiable event has occurred EXAMPLE 10.1 to "fix" the gain or loss realized. Reg. 1. I001-1(c)(I). Adam Acres sells property with an adjusted basis of $20,000 for $30,000 and has a realized gain of $10,000. If he had sold the property for $15,000, he would have had a $5,000 realized loss. If Adam exchanged Beach Corporation stock with an adjusted basis of $4,000 for Clark Corporation stock with a fair market value of $7,000, he has a realized gain of $3,000. If, however, Adam had Danville Corporation stock with an adjusted basis of S5,000 that has appreciated in value to S8,000, there is no realized gain because there is no sale or other disposition of the property. The recovery of cost doctrine allows the taxpayer to recover the cost of property before being taxed on rhc!'>. proceeds. While owning the asset, the taxpayer may recover the cost through depreciation deductions, providing it is depreciable property. Basis is reduced for the depreciation deductions and at the time of sale or other disposition the remaining amount of cost is recovered through a comparison of the amount realized with the adjusted basis to determine whether there is a realized gain or loss. ~10,01S AMOUNT REALIZED The amount realized from the sale or other disposition of property is the sum of any money received plus the fair market value of other property received. It does not include any amount received from the purchaser ns reimbursement for real property taxes which are treated as imposed on the purchaser, bur it docs include amounts representing real property taxes which are treated as imposed on the seller, if they are paid by the purchaser