tax 6
knohe_
copy_of_a360_problems_mod06_2.xlsxPR 6-1
| Tracy owns a nondepreciable capital asset held for investment. The asset was purchased for $250,000 six years earlier and is now subject to a $75,000 liability. During the current year, Tracy transfers the asset Tim in exchange for $94,000 cash and a new automobile with a $50,000 fair market value (FMV) to be used by Tracy for personal use; Tim assumes the $75,000 liability. |
| Required: |
| a. Determine the amount of Tracy's long-term capital gain (LTCG) or long-term capital loss (LTCL). |
| b. Show your calculation, labeling each line item. |
| Solution |
PR 6-2
| Doug receives a duplex as a gift from his uncle. The uncle's basis for the duplex and land is $90,000. At the time of the gift, the land and building have FMVs of $40,000 and $80,000, respectively. No gift tax is paid by Doug's uncle at the time of the gift. | ||||||||||||||||
| Solutions | ||||||||||||||||
| a. To determine gain, what is Doug's basis for the land? (Show your calculations) | ||||||||||||||||
| / | = | * | = | |||||||||||||
| b. To determine gain, what is Doug's basis for the building? (Show your calculations) | ||||||||||||||||
| / | = | * | = | |||||||||||||
| c. Will the basis of the land and building be the same as in Parts a. and b. for purposes of determining loss? | ||||||||||||||||
PR 6-3
| During the current year, Stan sells a tract of land for $800,000. The property was received as a gift from Maxine on March 10, 1995, when the property had a $310,000 FMV. The taxable gift was $300,000 because the annual exclusion was $10,000 in 1995. Maxine purchased the property on April 12, 1980, for $110,000. At the time of the gift, Maxine paid a gift tax of $12,000. In order to sell the property, Stan paid a sales commission of $16,000. | |||
| Required: | |||
| a. What is Stan's realized gain on the sale. (Show all calculations) | |||
| b. How would your answer to Part a. change, if at all, if the FMV of the gift property was $85,000 as of the date of the gift. | |||
| Solutions | |||
| a. | |||
PR 6-4
| Consider the four independent situations below for an unmarried individual, and analyze the effects of the capital gains and losses on the individual's AGI. | ||||||||||
| Situation 1 | Situation 2 | Situation 3 | Situation 4 | |||||||
| AGI (excluding property transactions) | $ 40,000 | $ 50,000 | $ 60,000 | $ 70,000 | ||||||
| Short-term capital gains (STCG) | 6,000 | 2,000 | 5,000 | 6,000 | ||||||
| Short-term capital losses (STCL) | 2,000 | 5,000 | 4,000 | 15,000 | ||||||
| Long-term capital gains (LTCG) | 3,500 | 15,000 | 10,000 | 9,000 | ||||||
| Long-term capital losses (LTCL) | 2,500 | 4,000 | 12,000 | 4,000 | ||||||
| Required: | ||||||||||
| a. Calculate the amount of net short-term capital gain (NSTCG) or net short-term capital loss (NSTCL). | ||||||||||
| b. Calculate the amount of net long-term capital gain (NLTCG) or net long-term capital loss (NLTCL). | ||||||||||
| c. Calculate AGI after considering the capital gains and losses. | ||||||||||
| d. Identify if in any of the four situations there is a loss carryforward. | ||||||||||
| Solutions | ||||||||||
| Situation 1 | Situation 2 | Situation 3 | Situation 4 | |||||||
PR 6-5
| To better understand the rules for offsetting capital losses and how to treat capital losses carried forward, analyze the following data for an unmarried individual for the period 2007 through 2010. No capital loss carryforwards are included in the figures. | ||||||||||
| Required: | ||||||||||
| For each year, determine AGI ad the capital losses to be carried forward to later tax year. | ||||||||||
| Solution | ||||||||||
| 2010 | 2011 | 2012 | 2013 | |||||||
| AGI (excluding property transactions) | $ 40,000 | $ 50,000 | $ 60,000 | $ 70,000 | ||||||
| Short-term capital gains (STCG) | 4,000 | 5,000 | 7,000 | 10,000 | ||||||
| Short-term capital losses (STCL) | 9,000 | 3,000 | 5,000 | 12,000 | ||||||
| Long-term capital gains (LTCG) | 6,000 | 10,000 | 2,200 | 6,000 | ||||||
| Long-term capital losses (LTCL) | 5,000 | 21,000 | 1,000 | 9,500 | ||||||
| AGI (included in property transactions) | ||||||||||
| STCL to be carried forward | - 0 | - 0 | - 0 | |||||||
| LTCL to be carried forward | - 0 | |||||||||
| Reconciliation: | ||||||||||
| NSTCG (NSTCL) | ||||||||||
| Carryforward from prior year | ||||||||||
| Adjusted carryforward amount | ||||||||||
| NLTCG (NLTCL) | ||||||||||
| Carryforward from prior year | ||||||||||
| Adjusted carryforward amount | ||||||||||
| Capital loss recorded on tax return | ||||||||||
