Homework 5 Solution

Expense 4001 Spring 2011 Homework Set #5 Solution PAGE 1 # 1 an) Amount Realized$37,500 Basis(45,000) Real Loss(7,500) Recognized Loss$0 on the grounds that individual use resource c. The genuine misfortune is $0. b) Same as (a). Like-kind trade rules don't have any significant bearing to individual use resources c)Her perceived misfortune is $0. Since the type of the exchange is a burglary, the perceived misfortune is the lesser of the balanced premise or the honest assessment of the benefit, diminished by the protection continues that she got (see Chapter 6).Therefore, the open door for the robbery misfortune reasoning on close to home use property is absent for this situation on the grounds that the protection continues got of $37,500 equivalent the honest evaluation of $37,500. #2 a. amt realized$65,000 â€Å"loss† premise 76,000 Recognized Loss(11,000) b. $0. The returns of $68,000 are between the increase premise of $80,000 and the misfortune premise of $60,000. Accordin gly, neither addition nor misfortune is perceived. #3 a. $225,000 b. $200,000 (note: just the structure can be deteriorated) c. $225,000 Basis for the addition is balanced premise d. She would be in an ideal situation to sell the house and purchase another one.Because the house is her own habitation, she could reject the increase at a bargain. At that point she would have the option to devalue the new house at a higher premise #4 a. Amt. Realized$265,000 Adj Basis 175,000 Real Gain90,000 b. Recoginzed Gain is $65,000 which is the less of acknowledged increase or boot got. c. Balanced premise of Land| $175,000| Gain Recognized| 65,000| Boot| (65,000)| Adj Basis of Building| 175,000| . Expense 4001 Spring 2011 Homework Set #5 Solution PAGE 2 . #5 Amt. Realized$1,235,000 [125000 + 900000 + 210000] Less: Basis of Apt850,000 Real Gain 385,000 b. Recog Gain$335,000 Cash in addition to contract Postponed Gain$50,000 . | Basis of Apt Bldg| $850,000| + gain recognized| 335,000| Less: Boot re ceived| (335,000)| Basis of Office Bldg| $850,000| #6| | Cost| $200,000| Legal Fees| $21,500| Streets and Sewers| $700,000| Basis| $921,500| #7 Basis b4 casualty$10,000 Insurance continues 13,500 Casualty Gain3,500 Basis after protection †#8 FIFO strategy used to figure out which offers were sold, along these lines Tommy Is treated as having sold 100 of the offers he bought on 10/16/06 Per Share Basis = $7500/125 offers = $ X Number of Shares Sold (100) =$ 60 6,000 for every offer Basis of Shares Sold Sales Procceds| 18,000| Less: Basis| (6,000)|LTCG| $ 12,000| Tax 4001 Spring 2011 Homework Set #5 Solution PAGE3 30. | a. | Realized addition $9,000 [($12,000 honest evaluation of new asset+ $4,000 boot got)- $7,000 balanced premise of old asset]. Perceived gain= $4,000. | Postponed gain= $5,000. | New basis= $7,000 ($12,000 honest assessment of new resource $5,000 delayed addition). | b. | Realized misfortune = $1,000. | Recognized loss= $-0-. | Postponed loss= $1,000. | New basi s= $16,000 ($15,000 honest evaluation of new asset+ $1,000 delayed misfortune). | c. | Realized misfortune = $1,500. Perceived loss= $-0-. | Postponed loss= $1,500. | New basis= $9,500 ($8,000 honest evaluation of new asset+ $1,500 deferred misfortune). | d. | Realized gain= $10,000. Perceived addition = $-0-. | Postponed gain= $10,000. | New premise = $22,000 ($32,000 honest evaluation of new resource †$10,000 postponed| | gain). | e. | Realized addition = $2,000. | Recognized gain= $1,000. | Postponed gain= $1,000. | New basis= $10,000 ($11,000 honest evaluation of new resource $1,000 delayed addition). | f. | Realized misfortune = $2,000. Perceived loss= $-0-. | Postponed loss= $2,000. | New basis= $10,000 ($8,000 honest assessment of new asset+ $2,000 delayed misfortune). Duty 4001 Spring 2011 Homework Set #5 Solution PAGE4 32. a. Since the proprietor is a proprietor financial specialist, the citizen use test applies. Supplanting the stockroom that is leased to different in habitants with a shopping center that is leased to different occupants in an alternate area qualifies as substitution property. Sum acknowledged Adjusted premise Realized addition $ 700,000 (470,000) $ 230,000 Recognized increase $ - 0-The reason for the substitution property is: Cost Postponed gain Basis $ 700,000 (230,000) $ 470000 b. Since the proprietor is a proprietor client, the useful use test applies.Replacing the stockroom utilized in his business with another distribution center in an alternate state which is to be utilized in his business qualifies as substitution property under the useful use test. Sum acknowledged Adjusted premise Realized addition Recognized increase $ 400,000 (300,000) $ 100,000 $ - 0-The reason for the substitution property is: Cost Postponed gain Basis $ 400,000 (100,000) $ 300,000 c. Since Swallow was a proprietor client of the structure, the practical use test applies. In this way, Swallow's utilization of the substitution property and of the auto matically changed over property must be the same.Since Swallow's utilization of the four-unit high rise is not the same as the utilization of the structure in its retail business, the high rise doesn't qualify as substitution property. Sum acknowledged Adjusted premise Realized increase Recognized addition $ 300,000 (250,000) $ 50,000 $ 50,000 The reason for the high rise is its expense of $300,000. d. Not qualified substitution property since they are proprietor clients so utilitarian use test applies. In this way they should perceive their acknowledged addition of $30,000 and their premise in the duplex is $200,000.