Tax Basis and Capital Gains and Losses

James and Pamela Brock had the following transactions for the year:

• Sold stock received as an inheritance from Pamela's Mother for $35,000. Pamela's Mother purchased the stock 10 years ago for $9,000. On the date of Pamela's Mother's death the stock's FMV was $29,000. Pamela's Mother died three years ago.
• Sold stock purchased ten months ago for $6,000 for $3,200.
• Sold land that was a gift from James's Uncle for $150,000. The property was received on June 15, 1995, when the property had a $125,000 FMV. The taxable gift was $115,000 because the annual exclusion was $10,000 in 1995. James's Uncle purchased the land on July 27, 1980, for $85,000. At the time of the gift, gift tax of $5,000 was paid. A sales commission of $3,000 was paid at the closing on the sale of the land.
• Sold stock purchased four years ago for $1,350 for $1,725.
• Sold stock purchased 13 months ago for $10,000 for $9,200.
• Purchased stock on July 8th for $11,000; the stock is currently held in an investment account.
• The Brock's have a $8,000 short-term loss carryforward from the prior year.
• On January 1, 2009 Pamela purchased an 8%, $100,000 corporate bond for $92,277. The bond was issued on January 1, 2008, and matures on January 1, 2014. Interest is paid semiannually, and the effective yield to maturity is 10% compounded semiannually. On July 1, of the current tax year, Pamela sold the bond for $95,949.

Prepare a schedulethat shows the:

• Proceeds of sale for each transaction above;
• Cost basis for each transaction above;
• The gain or loss for each transaction above; and
• Identify if the gain calculated above is short-term of long-term.

Calculate:

• Net short-term capital gain or loss before consideration of the prior year loss carryforward;
• Net long-term capital gain or loss before consideration of the prior year loss carryforward;
• Amount of capital gain to be reported; and
• Amount of capital loss that will be carried forward to next year.

Be sure to show all of your calculations.

Description Proceeds Cost Basis Gain (Loss) Short-Term Interest Received Amortization of OID Interest Income Long-Term Basis of Bond Inherited Stock Stock Land (1) Stock Stock Bond (2) (1) Amount realized Minus: basis Gain Realized [1a] (2) 1/1/2009 6/30/2009 12/31/2009 6/30/2010 Interest received = $100,000 * 8% / 2 because interest is paid semiannually. Amortization of OID = 5% * Basis of Bond (5% = 10% effective yield divided by two) Interest income = Interest Received + Interest Income Basis of Bond = Prior Basis amount + current Amortization of OID Net Short-Term Capital Gain Net Long-Term Capital Gain Short-term Capital Loss Carryforward Capital Gain to be Reported Capital Loss Carryforward (Carried forward from prior year) 0 Comments