10

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pr10.xlsx
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Sheet1

Course Project Solutions
Description Proceeds Cost Basis Gain (Loss) Short-Term Long-Term Comments
Inherited Stock 35,000 29,000 6,000 ü Inherited - so date of death FMV
Stock 3,200 6,000 (2,800) ü
Land (1) 147,000 137,000 10,000 ü You have to calculate the cost basis - see 1 and 1a below
Stock 1,725 1,350 375 ü
Stock 9,200 10,000 (800) ü 13-months The stock was held over 1 year so it is Long Term
Bond (2) 95,949 95,777 172 ü You have to calculate the basis, see 2 below
279,127
(1)
Amount realized 292,074
Minus: basis (1a) (279,127)
Gain Realized 12,947
[1a]
$85,000 Original purchase price of property, paid by James's Uncle
$5,000 Gift tax paid at time of gift Include all of the gift tax to get your basis
$125,000 FMV of property at time of gift
$115,000 Amount of gift (equals the FMV of property less the exclusion amount.
(2)
Interest Amortization Interest Basis of
Received of OID Income Bond
1/1/09 4000 1000 4000 93,777
6/30/09 4000 1000 4000 94,777
12/31/09 4000 1000 4000 95,777 Review the solution to see how to work this part.
6/30/10 Look at the formulas in this part of the solution spreadsheet
Look at my OID example spreadsheet for assistance on how to calculate this.
Complete this section after you have finished the top section.
Net Short-Term Capital Gain (3,600) Review the solution to see how to work this part.
Net Long-Term Capital Gain 16,547
Short-term Capital Loss Carryforward 8,000 (Carried forward from prior year)
Capital Gain to be Reported 4,947
Capital Loss Carryforward 11,600

You are going to need this information

Sheet2

0.6355180784
95949 6000
92277 3200
3672 2800
1725 1350 375

Solution

Course Project Solutions
Description Proceeds Cost Basis Gain (Loss) Short-Term Long-Term Comments
Inherited Stock 35,000 29,000 6,000 X Cost basis is FMV on date of death. Inherited property is always deemed to be long-term regardless of the time held.
Stock 3,200 6,000 (2,800) X Stock was held for less than one year.
Land (1) 147,000 86,739 60,261 X Held from June 15, 1995.
Stock 1,725 1,350 375 X Stock was held for four years.
Stock 9,200 10,000 (800) X Stock was held for more than one year.
Bond (2) 95,949 94,212 1,737 X Bond was held more than one year.
(1)
Amount realized 147,000 ($150,000 - $3,000 Sale Commission)
Minus: basis 86,739 ($85,000 + ($5,000 * (($125,000 - $85,000)/$115,000)) [1a]
Gain Realized 60,261
[1a]
$85,000 Original purchase price of property, paid by James's Uncle
$5,000 Gift tax paid at time of gift
$125,000 FMV of property at time of gift
$115,000 Amount of gift (equals the FMV of property less the exclusion amount.
(2)
Interest Amortization Interest Basis of
Received of OID Income Bond
1/1/09 92,277
6/30/09 4,000 614 4,614 92,891
12/31/09 4,000 645 4,645 93,535
6/30/10 4,000 677 4,677 94,212
Interest received = $100,000 * 8% / 2 because interest is paid semiannually.
Amortization of OID = 5% * Basis of Bond (5% = 10% effective yield divided by two)
Interest income = Interest Received +OID
Basis of Bond = Prior Basis amount + current Amortization of OID
Net Short-Term Capital Gain (2,800)
Net Long-Term Capital Gain 67,573
Short-term Capital Loss Carryforward 8,000 (Carried forward from prior year)
Capital Gain to be Reported 56,773
Capital Loss Carryforward 0