CH3_1_Basis and Holding Period Examples

Question 1

1. Mr. Pine purchased a small office building. Included in his costs were the following:

 Cash down payment $ 50,000
 Mortgage on property assumed 300,000
 Title insurance 등기 비용 2,000
 Fire insurance premiums (비용처리) 2,000
 Attorney fees 1,000
 Rent to former owner to allow Mr. Pine to occupy
the office building prior to closing (비용처리해야함) 4,000
What is Mr. Pine’s basis in the property?

A. $359,000
B. $355,000
C. $353,000 D. $350,000

Answer 1

50,000+300,000+2,000+1,000=353,000

C. $353,000

Question 2

2. Iris King bought a diamond necklace for her own use at a cost of $10,000 10 years ago. In the current year, when the fair market value was $12,000, Iris gave this necklace to her daughter, Ruth. No gift tax was due. If Ruth sells this diamond necklace in the current year for $13,000, Ruth’s recognized gain will be

A. $3,000 B. $2,000 C. $1,000
D. $0

Answer 2

12,000>10,000 Gain basis 10,000
Realized amount 13,000-10,000(adjusted basis)=gain 3,000

A. $3,000

Question 3

3. In the current year, Christian received a gift of property from his mother that had a fair market value of $50,000. Her adjusted basis was $20,000. She paid a gift tax of $9,000. What is Christian’s basis in the property?

A. $50,000 B. $59,000 C. $29,000 D. $27,500

Answer 3

50,000>20,000 Gain basis
20,000+9,000*0.83 (7,500)
=27,500
(50,000-20,000)/(50,000-14,000)

D. $27,500

Question 4

4. Dunn received 100 shares of stock as a gift from Dunn’s grandparent. The stock cost Dunn’s grandparent $32,000, and it was worth $27,000 at the time of the transfer to Dunn. Dunn sold the stock for $29,000. What amount of gain or loss should Dunn report from the sale of the stock?
   A. $0
   B. $2,000 gain. C. $3,000 gain. D. $3,000 loss.

Answer 4

A. $0

27,000<32,000 loss basis
selling price 29,000
FMV

Question 5

5. The basis in property inherited from a decedent may be determined as follows:

A. The decedent’s basis plus any inheritance tax paid on the increased value.
B. The fair market value at the date of death.
C. The fair market value at an alternate valuation date.
D. The fair market value at the date of death or the fair market value at an alternative valuation date.

Answer 5

D

Question 6

6. In January Year 1, Joan Hill bought one share of Orban Corp. stock for $300. On March 1, Year 3, Orban distributed one share of preferred stock for each share of common stock held. This distribution was nontaxable. On March 1, Year 3, Joan’s one share of common stock had a fair market value of $450, while the preferred stock had a fair market value of $150. After the distribution of the preferred stock, Joan’s bases for her Orban stocks are

Common 	 Preferred 
A.	$300	$0
B.	$225	$75
C.	$200	$100
D.	$150	$150

Answer 6

지분이 불변
original common stock 300
allocation

450+150 각각의 FMV
450/600=0.75
150/600=0.25

0. 75*300=225
1. 25*300=75

B. $225 $75