HW 4

CH. 7.

3:

a. Amount realized: $35,000

Realized loss: $10,000

Recognized loss: $0

b. Recognized gain: $0

Realized loss: -$10,000

c. Recognized gain: $0

Realized loss: -$10,000

d. Recognized gain: $0

Realized gain: $3,000

7:

a. $3,000

b.$15,000

c. $5,000

d. $12,000

13:

a. The valuation date cannot be altered. The valuation of the property cannot be adjusted after the date Dazie received the property. If she were to try and convert the asset from personal to business the lower valuation would be used.

b. Dazie’s basis for the property Is its fair market value.

c. If the valuation were to change it would not affect the outcome.

21:

a. -$5,000

b. $5,000

c. $48,000

d. The 2015 sale of the property will not have an effect on Tonya because she sold it and has not claim to it.

e. Ms. Tonya Fletcher

The Corral

El Paso, TX 79968

Ms. Fletcher,

After reviewing your case I have come to the following conclusion. Since your loss on the property is $5,000 it is not recognized. It is lost cash. The boot of $3,000 cash paid to you is recognized as a capital gain and is recognized and will be taxed.

29:

Realized Recognized Postponed

a. $5,000 $7,000 $2,000

b. 1,000 12,000 11,000

c. 5,000 12,000 7,000

d. 14,000 1,000 -13,000

e. 1,000 9,000 -8,000

f. -3,000 14,000 -11,000

33:

Ross should not make a new proposal to Steve because this seems to be an unethical proposition. Ross is the owner of the company that he told Steve would be willing to purchase the house for $130,000. By trying to convince him that he should sell knowing he will most likely be able to sell to the city and make a substantial profit. If he is upfront that the purchaser is his own company than I fell he can make the offer but he must offer full disclosure on all of the details and circumstances surrounding the situation. If he makes the proposal and is honest about the circumstances I think Steve will not accept the deal because he will feel confident he can sell to the city for more. If Ross wants to make a new offer and feels he can make that money I believe Steve would keep the property and sell to the city.

CH. 8

3:

Antique Vase: long-term capital gain $5,000

Blue growth fund: long-term capital gain $16,000

Orange bonds: long-term capital gain $7,250

Green stock: short-term capital gain $2,000

9:

Carla is entitled to the $836,000. Since the option was not exercised Carla is entitled to a capital gain and Raymond would be subject to a capital loss as a premium payment for holding the land under the option.

19:

a.

Long-term capital loss: $43,000

Short-term capital gain: $14,000

Short-term capital loss: $18,000

b.

Bertha Jarrow

1120 West Street

Ashland, OR 97520

Ms. Bertha Jarrow,

This is in response to your to your request on how your residence will be taxed. Because your residence was sold for less than the cost you paid, there is a $28,000 loss. The tax law does not allow the loss to be deducted on your tax return because the residence was a personal use asset. The only personal loss that is deductible is a casualty. Let me know if you have any other questions.

Justin Hardwick

21:

Harriet should take the $650,000 cash for the 10 year covenant as well as the annual salary of 65,000 royalty. It will be treated as a capital asset and taxed as such.

27:

total loss or gain 1231 Recapture balance

Rack: ordinary income 47,000 47,000 0

Forklift: 1231 loss 7,000 0 7,000

Bin: ordinary income 7,000 7,000 0

Sienna has $54,000 of ordinary income because 1245 recapture and 7,000 of 1231 loss.

$0 are recognized as long term gains.