Basis
Gain
Calculations
Misc
100

For most assets, how do you calculation adjusted basis

Cost on the date of acquisition

+ Capital improvement or additions

- Cost Recovery/depreciation and other capital recoveries

100

What is the formula for the calculation of realized gain and loss?

Amount Realized

- Adjusted Basis

- Selling Expenses (if not included in amount realized)

100

John buys the following:

100 shares of OTA Inc for $2 each on 1/1/X2

50 shares of OTA Inc for $3 each on 3/5/X2

40 shares of OTA Inc for $4 each on 6/9/X2.

John sells 50 shares on 7/6/X3 for $4 each. What is his gain/loss?

$200 (50*$4)  less $100 (50*$2) = $100

100

What code section defines related parties for determination of "attrition" or constructive ownership?

Section 267

200

Name 3 of the 5 exceptions exceptions for determining cost basis

Bargain Purchase

Several Assets purchased for 1 price

Assets received as a gift

Assets received as part of an inheritance

Assets received as part of a tax free exchange

200

How do you calculation Amount Realized?

Money Received

+ FMV of other property received

+ Debt Relief

- Selling Expenses

200

Raymond exchanges an apartment building with a basis of $1,000,000 and a FMV of $1,500,000 for a factory building with a FMV of $1,500,000. What is Raymond's realized and recognized gain? What is Raymond's basis in the factory building?

This is a realization event. He realized $500,000 of gain but because its a 1031 exchange, he does not recognize any gain. Instead he takes a basis in the factory of $1,000,000.
200

Define "wash sale"

Sale of stock at a loss and then replacing the stock sold by buying identical shares shortly before or after the sale

300

What is a bargain purchase price?

An asset is transferred at less than fair market value

300

What is "Debt Relief"

Debt given up less debt assumed

300

RIA Inc. gives inventory with a FMV of $40,000 to a social media influencer in 20X4. In 20X5, the social media influencer sells the inventory for $45,000. For the influencer, what is the tax consequence for receiving the inventory and for reselling it?

$40,000 of income when received the inventory

$5,000 of income when selling the inventory

300

If an asset is sold at a loss to a related party when is that loss able to be recognized?

It can only be recognized when it is sold to an unrelated 3rd party and it offsets a gain 

400
If the FMV on the date of the gift is less than the basis of the donor, what is the recipient's basis in the asset?

They have a dual basis.

Gain basis = donor's basis

Loss basis = FMV on date of gift

400

Define Boot and give an example

Boot is anything in addition to the elements exchanged. Or property that is not like kind.  

Cash

Other property

Debt Relief

400

Rhonda exchanges a piece of equipment with a basis of $10,000 and a FMV of $15,000 for a different piece of equipment with a FMV of $7,000 and stock with a FMV of $8,000. What is Rhonda's realized and recognized gain?

Amount realized = $7,000 + $8,000 = $15,000

Basis = $10,000

Realized gain and recognized gain = $5,000

400

What are the basic requirement for a 1031 exchange?

Property must be like kind

Used in exchange

Both property received and property given up must be either used in a trade or business or held for investment

500

How do you determine fair market value if the value of the property received cannot be determined?

The value of the property given up may be used

500

Evelyn and George purchased a home in sunny California in 1943 for $70,000. In 20X5 they sell their home for $670,000. What is their realized and recognized gain?

$670,000 - $70,000 = $600,000

$600,000 realized gain

-$500,000 exclusion

=$100,000 recognized gain

500

Monica and Josh enter into a 1031 exchange transaction. Monica exchanges 100 acres of farmland with a basis of $100,000, FMV of $250,000 subject to a mortgage of $25,000 for Josh's apartment building with a FMV of $225,000 and Josh assumes Monica's mortgage. How much gain is recognized by Monica and what is her basis in the apartment building?

Amount Realized

$225,000 property + $25,000 debt relief - $100,000 = $150,000 realized gain

Boot = $25,000, therefore a gain of $25,000 recognized

Basis = $100,000 + $25,000 = $125,000

500

How are related parties defined for constructive ownership?

Brothers and sisters, spouse parents, grandparents, children and grandchildren

a corp that is owned more than 50% directly or indirectly

2 corps that are members of a controlled group

a series of other complex relationships

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