true or false for questions
Use the following information when answer questions 1-13 below. Please be sure to take note of any updated information in the question itsell. Pauls is a single unmarried) taxpayer. She is a calendar-year, cash-basis taxpayers and the tax year as 2020. Assume that she is taxed as a sole proprietor. The following information is available concerning her property transactions during the 2020 a year. The first several questions will only use the information in the following chart Property sales during 2020 (all stock ticker symbols given - assume 100 shares sold Sales Date Acquisition Date Sales Price Basis IBM 03-13-20 02-15-20 $42.000(1)(2) MRK 04-28-20 02-21-20 $32,000 (1) (3) KO 08-01-20 04-01-20 57.400(1) $3,40014) BUD 08-01-20 03-15-13 52300(1) $4,700 (4) 08-01-20 03-15-13 $6.200(0) $5,100 (4) GM 09.30-20 04.13.14 $1.500 (1) $2,300 (4) 10-03-20 01-03-20 $4,400 (1) $10.600 (4) APPL. 12-04-20 06-14-19 $12,200 (1) 510,100 (4) Machine 4 11-03-20 07.19.19 $450.000 (5) (6) Land 2 02-09-19 PEP NOTE REGARDING PROPERTY SALES Assume no commission is charged on these sales Assume that Paula inherited these shares from her Father At the time of his death, the following applied to the father's ownership of these shares -Father's basis in shares $10,000 -FMV of shares - $22.000 -Father's acquisition date 11.1.19 Assume that Paula was given these shures by her grandmother. On the date of the gift, the following applied to the shares Grandmother's basis in shares - 550,000 -FMV of shares $35.000 Grandmother's acquisition date of shares = 3-13-19 Continued on next page 2 of 6 (4) (6) Assume that the broker's commission, if any, is already included in the listed cost Assume that commissions of $10,000 were paid but that there were no advertising costs involved Assume that the original cost of this act was S460,000. Assume that it was capitalized and depreciated using MACRS (Section 179 was not used for personally in the year this asset was placed in service). Finally, assume that the mid quarter convention was used for personality in the year it was placed in service Assume that Land 2 was bought for a price of S255.000. In addition to the agreed upon price, a 10% realtor's commission was paid. The land was to be used in Paula's business but was instead sold for an agreed upon price of $310.000. Once again a realtor's commission of 10% was paid. Assume that both commissions were entirely paid by Paula (both buying and selling-she is not a very good negotiator) 73 2. 4. 5. 6. 7. 8. Questions: 1. Paula's result from the sale of the IBM stock would be a $20,000 LTCG. What if Paula's father's basis had been $30,000? Now her result from the sale of the IBM stock would have been a S12,000 LTCG. 3. Paula's result from the sale of the MRK stock would be an $18,000 LTCL. What if Paula were to sell the MRK shares for $40,000. Now her result from the sale of the MRK stock would be a gain of S8,000 LTCG. Paula's result from the sale of the KO stock would be a $3,000 STCG. Paula's result from the sale of the BUD stock would be a $2,400 LTCG. Paula's result from the sale of the PEP stock would be a $1,100 LTCG. Paula's result from the sale of the GM stock would be a $500 STCL. Paula's result from the sale of the BA stock would be a $6,200 STCL. Paula's result from the sale of Machine 4 would be a $146,612 Ordinary Gain. Suppose that Paula was able to totally expense Machine 4 using a Section 179 election in 2019 and that she elected to do so. Now the result of her sale of Machine 4 would be a $440,000 ordinary gain. 12. Ignore Question # 11 and assume the same facts as in Question # 11 with one exception. What is Paula had placed Machine 4 in service on 4/19/20 vs. 4/19/19. Now your answer would be that the result of her sale of Machine 4 resulted in an Ordinary Gain of S146,612. Paula's result from the sale of Land 2 would be a $1,500 Section 1231 loss. When netting her results for the year, Paula will net her Section 1231 activity, if any, first 15. Ignoring Section 1231 activity, between netting her Capital gain/loss activity and netting her ordinary gain/loss activity, it is very important that Paula net her Capital gain/loss activity first 9. 10. 11. 13. 14 Use the following information when answer questions 1-13 below. Please be sure to take note of any updated information in the question itsell. Pauls is a single unmarried) taxpayer. She is a calendar-year, cash-basis taxpayers and the tax year as 2020. Assume that she is taxed as a sole proprietor. The following information is available concerning her property transactions during the 2020 a year. The first several questions will only use the information in the following chart Property sales during 2020 (all stock ticker symbols given - assume 100 shares sold Sales Date Acquisition Date Sales Price Basis IBM 03-13-20 02-15-20 $42.000(1)(2) MRK 04-28-20 02-21-20 $32,000 (1) (3) KO 08-01-20 04-01-20 57.400(1) $3,40014) BUD 08-01-20 03-15-13 52300(1) $4,700 (4) 08-01-20 03-15-13 $6.200(0) $5,100 (4) GM 09.30-20 04.13.14 $1.500 (1) $2,300 (4) 10-03-20 01-03-20 $4,400 (1) $10.600 (4) APPL. 12-04-20 06-14-19 $12,200 (1) 510,100 (4) Machine 4 11-03-20 07.19.19 $450.000 (5) (6) Land 2 02-09-19 PEP NOTE REGARDING PROPERTY SALES Assume no commission is charged on these sales Assume that Paula inherited these shares from her Father At the time of his death, the following applied to the father's ownership of these shares -Father's basis in shares $10,000 -FMV of shares - $22.000 -Father's acquisition date 11.1.19 Assume that Paula was given these shures by her grandmother. On the date of the gift, the following applied to the shares Grandmother's basis in shares - 550,000 -FMV of shares $35.000 Grandmother's acquisition date of shares = 3-13-19 Continued on next page 2 of 6 (4) (6) Assume that the broker's commission, if any, is already included in the listed cost Assume that commissions of $10,000 were paid but that there were no advertising costs involved Assume that the original cost of this act was S460,000. Assume that it was capitalized and depreciated using MACRS (Section 179 was not used for personally in the year this asset was placed in service). Finally, assume that the mid quarter convention was used for personality in the year it was placed in service Assume that Land 2 was bought for a price of S255.000. In addition to the agreed upon price, a 10% realtor's commission was paid. The land was to be used in Paula's business but was instead sold for an agreed upon price of $310.000. Once again a realtor's commission of 10% was paid. Assume that both commissions were entirely paid by Paula (both buying and selling-she is not a very good negotiator) 73 2. 4. 5. 6. 7. 8. Questions: 1. Paula's result from the sale of the IBM stock would be a $20,000 LTCG. What if Paula's father's basis had been $30,000? Now her result from the sale of the IBM stock would have been a S12,000 LTCG. 3. Paula's result from the sale of the MRK stock would be an $18,000 LTCL. What if Paula were to sell the MRK shares for $40,000. Now her result from the sale of the MRK stock would be a gain of S8,000 LTCG. Paula's result from the sale of the KO stock would be a $3,000 STCG. Paula's result from the sale of the BUD stock would be a $2,400 LTCG. Paula's result from the sale of the PEP stock would be a $1,100 LTCG. Paula's result from the sale of the GM stock would be a $500 STCL. Paula's result from the sale of the BA stock would be a $6,200 STCL. Paula's result from the sale of Machine 4 would be a $146,612 Ordinary Gain. Suppose that Paula was able to totally expense Machine 4 using a Section 179 election in 2019 and that she elected to do so. Now the result of her sale of Machine 4 would be a $440,000 ordinary gain. 12. Ignore Question # 11 and assume the same facts as in Question # 11 with one exception. What is Paula had placed Machine 4 in service on 4/19/20 vs. 4/19/19. Now your answer would be that the result of her sale of Machine 4 resulted in an Ordinary Gain of S146,612. Paula's result from the sale of Land 2 would be a $1,500 Section 1231 loss. When netting her results for the year, Paula will net her Section 1231 activity, if any, first 15. Ignoring Section 1231 activity, between netting her Capital gain/loss activity and netting her ordinary gain/loss activity, it is very important that Paula net her Capital gain/loss activity first 9. 10. 11. 13. 14
