Chapter 14

Question 1

What is realized gain or loss

Answer 1

Amount realized minus adjusted basis = Realized Gain/Loss

Question 2

What is recognized g/l

Answer 2

The amount of realized gain that is included in gross income to arrive at AGI

Question 3

What is the difference between realized g/l and recognized g/l

Answer 3

Realized gain/losses are not always recognized. Permanent BTD

Question 4

What is Amount Realized

Answer 4

Total consideration received by seller, including cash, FMV of property received, loans transferred reduced by any selling commissions.

Question 5

How do you calculate amount realized

Answer 5

Selling price - Selling Costs

Question 6

How is a “Bargain Purchase” valued upon acquisition

Answer 6

Asset basis is generally FMV upon acquisition.

Question 7

John pays $1000 for a ram van worth $4000 FMV. What is John’s adjusted basis?

Answer 7

$4000 because that is the FMV of the ram van upon acquisition

Question 8

What is the general rule for gift basis?

Answer 8

When someone sells a gift its selling price minus basis of original owner = recognized gain/loss

Question 9

What basis is used for selling a gift basis for gain

Answer 9

When a gifted asset is disposed of by the donee, the basis for calculating any gain is the donors adj. basis.

Question 10

What basis is used for calculating gift basis at loss

Answer 10

Less or FMV at date of gift or Donor’s adjusted basis

Question 11

What basis is used for no g/l when dual basis exists

Answer 11

no g/l recognized basis of gift asset = amt realized

Question 12

Grandma sells to Alex an asset for 8k FMV. Grandma bought for 10k. What is the unrealized loss? Alex then sells that car for 11000, 7000, and 9000, what is the realized gain for each?

Answer 12

Unrealized loss is 2000

Sold at 10000 = $1000 gain
Sold at 7000 = $1000 loss
Sold at 9000 = 0 no g/l

Question 13

How does basis change upon death.

Answer 13

Basis is FMV upon death. Unrealized loss and gains disapear.

Question 14

What are disallowed losses for personal assets?

Answer 14

When converting personal to business asset, basis of asset converted is lower of personal use basis or FMV at date of conversion. (Personal losses cannot be converted into business losses)

Question 15

What are Wash Losses

Answer 15

When you sell securities at a loss and acquire identical securities within 30 days of sale to deduct them. Loss gets deferred until sold free of wash sale limit. ONLY applies to exact same stock

Question 16

Grandma gifts investment land to Alex when FMV is 9000. Grandma had bought in 1985 for 10,000. What is Alex’s recognized g/l if he sells it for 4000, 9220, and 14000?

Answer 16

4000 = Loss of 5,000
9220 = 0
14000 = Gain of 4000