These questions are fromfrom 'South-Western Federal Taxation: Taxation of Business Entities 2015 - 18th edition'by James Smith. Please answer each ofquestions/problems 1-7 below:

1.

Holly owns stock with an adjusted basis of $2,500 and fair market value of $9,500. Holly expects the stock to continue to appreciate. Alice, Holly's best friend, recently had surgery for cancer. Alice's physicians have told her that her life expectancy is between six months and one and a half years. One day at lunch, the two friends were discussing their tax situations (both believe they pay too much), when Alice mentioned that she had read a newspaper article about a tax planning opportunity that might be suitable for Holly. Holly would make a gift of the appreciated stock to Alice. In her will, Alice would bequeath the stock back to Holly. Because Alice is confident she will live longer than a year, the basis of the stock to Holly would be the fair market value on the date of Alice's death. Alice would "feel good" because she had helped Holly "beat the tax system." You are Holly's tax adviser. How will you respond to Alice's proposal? Would your response change if the stock were a painting that Alice could enjoy for her remaining days? Explain.

2.

Margo receives a gift of real estate with an adjusted basis of $175,000 and a fair market value of $100,000. The donor paid gift tax of $15,000 on the transfer. If Margo later sells the property for $110,000, what is her recognized gain or loss

3.

Tyneka inherited 1,000 shares of Aqua, Inc. stock from Joe. Joe's basis was $35,000, and the fair market value on July 1, 2014 (the date of death), was $45,000. The shares were distributed to Tyneka on July 15, 2014. Tyneka sold the stock on July 30, 2015, for $33,000. After giving the matter more thought, she decides that Aqua is a good investment and purchases 1,000 shares for $30,000 on August 20, 2015.

a. What is Tyneka's basis for the 1,000 shares purchased on August20,2015?

b. Could Tyneka have obtained different tax consequences in (a) if she had sold the 1,000 shares on December 27, 2014, and purchased the 1,000 shares on January 5, 2015? Explain

4.

Benny purchased $400,000 of Peach Corporation face value bonds for $320,000 on November 13, 2013. The bonds had been issued with $80,000 of original issue discount because Peach was in financial difficulty in 2013. On December 3, 2014, Benny sold the bonds for $283,000 after amortizing $1,000 of the original issue discount. What are the nature and amount of Benny's gain or loss?

5.

The taxpayer is an antiques collector and is going to sell an antique purchased many years ago for a large gain. The facts and circumstances indicate that the taxpayer might be classified as a dealer rather than an investor in antiques. The taxpayer will save $40,000 in taxes if the gain is treated as long-term capital gain rather than as ordinary income. The tax- payer is considering the following options as ways to ensure the $40,000 tax savings.

• Give the antique to his daughter, who is an investment banker, to sell.
• Merely assume that he has held the antique as an investment.
• Exchange the antique in a like-kind exchange for another antique he wants.

One of the tax preparers the taxpayer has contacted has said that he would be willing to prepare the return under the second option. Would you? Why or why not? Evaluate the other options.

6.

Delphinium Company owns two parcels of land ( 1231 assets). One parcel can be sold at a loss of $60,000, and the other parcel can be sold at a gain of $70,000. The company has no nonrecaptured 1231 losses from prior years. The parcels could be sold at any time because potential purchasers are abundant. The company has a $35,000 short-term capital loss carryover from a prior tax year and no capital assets that could be sold to generate long-term capital gains. Both land parcels have been held more than one year.

What should Delphinium do based upon these facts? (Assume that tax rates are constant and ignore the present value of future cash flows.)

7.

Larry is the sole proprietor of a trampoline shop. During 2014, the following transactions occurred.

-Unimproved land adjacent to the store was condemned by the city on February 1. The condemnation proceeds were $15,000. The land, acquired in 1985, had an allocable basis of $40,000. Larry has additional parking across the street and plans to use the condemnation proceeds to build his inventory.

A truck used to deliver trampolines was sold on January 2 for $3,500. The truck was pur- chased on January 2, 2010, for $6,000. On the date of sale, the adjusted basis was zero.

-Larry sold an antique rowing machine at an auction. Net proceeds were $4,900. The rowing machine was purchased as used equipment 17 years ago for $5,200 and is fully depreciated.

-Larry sold an apartment building for $300,000 on September 1. The rental property was purchased on September 1, 2011, for $150,000 and was being depreciated over a 27.5-year life using the straight-line method. At the date of sale, the adjusted basis was $124,783.

-Larry's personal yacht was stolen on September 5. The yacht had been purchased in August at a cost of $25,000. The fair market value immediately preceding the theft was $19,600. Larry was insured for 50% of the original cost, and he received $12,500 on December 1.

-Larry sold a Buick on May 1 for $9,600. The vehicle had been used exclusively for personal purposes. It was purchased on September 1, 2010, for $20,800.

-Larry's trampoline stretching machine (owned two years) was stolen on May 5, but the business's insurance company will not pay any of the machine's value because Larry failed to pay the insurance premium. The machine had a fair market value of $8,000 and an adjusted basis of $6,000 at the time of theft.

-Larry had AGI of $102,000 from sources other than those described above.

-Larry has no nonrecaptured 1231 lookback losses.

a. For each transaction, what are the amount and nature of recognized gain or loss?

b. What is Larry's 2014 AGI?