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Jesse Handel, Scientist
Category: Homework
Satisfied Customers: 307
Experience:  BS Chem. and Bact. 10 yrs chemist. 10 yrs tax preparer.
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# 1. Determine the adjusted basis of the building and the land

### Customer Question

1. Determine the adjusted basis of the building and the land as of the end of year 3: Morrison purchases a factory for \$800,000. The purchase price is properly allocated 90% to the building and 10% to the land. In the first year, Morrison adds a storage shed to the building at a cost of \$8,000. The utility company pays Morrison \$1,500 for an easement to run utility lines across the land. A total depreciation of \$45,000 is deducted over the 3 years. (Points: 1)
\$728,000 building; \$ 78,500 land
\$683,000 building; \$ 80,000 land
\$683,000 building; \$ 78,500 land
\$728,000 building; \$ 80,000 land

2. David pays \$35,000 cash and issues a mortgage note for \$95,000 to purchase land. He pays \$750 to his attorney for reviewing the purchase agreement. David's initial basis in the land is (Points: 1)
\$ - 0 -
\$ 35,000
\$ 35,750
\$130,000
\$130,750

3. Vijay buys a 20% interest in Duvall Corporation paying \$75,000 cash on January 1, 2006. During 2006, Duvall Corporation reports a loss of \$60,000 and pays cash dividends to shareholders of \$5,000. For 2007, Duvall Corporation has income of \$200,000 and pays cash dividends of \$40,000. If Duvall Company is organized as an S Corporation, Vijay's basis in the Duvall Corporation stock at the end of 2007 is: (Points: 1)
\$ 63,000
\$ 64,000
\$ 75,000
\$ 94,000
\$103,000

4. Matt, an attorney, performs 5 hours of legal work for Andy. Matt 's normal billing rate is \$120 per hour. Andy, a software consultant, gives Matt a new computer for his office in payment of the bill. The computer's adjusted basis was \$550 and its fair market value is \$750. Matt 's basis in the computer is (Points: 1)
\$ - 0 -
\$ 550
\$ 600
\$ 750
\$1,300

5. Harold purchases land and a building by paying cash of \$35,000, and assuming the seller's \$82,000 mortgage. In addition, Harold pays \$3,000 of legal fees related to the purchase. For property tax purposes, the land is valued at \$17,000 and the building at \$34,000. Harold's basis in the building is (Points: 1)
\$ 17,000
\$ 34,000
\$ 40,000
\$ 80,000
\$120,000

6. Christy purchases all of the assets of Michael's Security Service for \$200,000. The assets are as follows:

Asset  ;                                       Adjusted Basis                        Fair Market Value
Inventory                                    \$25,000                                    \$50,000
Equipment                                    60,000                   & nbsp;                    40,000
Supplies             ;                             20,000                                        20,000
Building                             &n bsp;           80,000                                        95,000
Land                &nb sp;                              10,000                                        20,000
&nb sp;                                      \$195,000                                  \$225,000

What is Christy's basis in the equipment? (Points: 1)
\$17,776
\$35,556
\$40,000
\$60,000
\$61,538

7. John purchases all of the common stock of Clarke Corporation for \$280,000. The assets of the corporation are:

Asset  ;                                       Adjusted Basis                        Fair Market Value
Inventory                                    \$25,000                                    \$50,000
Equipment                                    60,000                   & nbsp;                    40,000
Supplies             ;                             20,000                                        20,000
Building                             &n bsp;           80,000                                        95,000
Land                &nb sp;                              10,000                                        20,000
&nb sp;                                      \$195,000                                  \$225,000

What is John's basis in the common stock he acquired? (Points: 1)
\$ 55,000
\$195,000
\$225,000
\$250,000
\$280,000

8. Steve is building a warehouse for use in his business. The construction costs include the following:

Direct labor     & nbsp;                                                         \$35,000
Direct materials                   &nb sp;                                       20,000
Architect fees                             & nbsp;                                  5,000
Interest on construction loan             &nb sp;                           3,000
Depreciation of equipment used in construction           1,500

What is Steve's basis in the warehouse? (Points: 1)
\$60,000
\$61,500
\$63,500
\$64,500
\$66,500

9. James receives a gift of rare books valued at \$10,000. The books have an adjusted basis of \$6,000 to the donor. No gift tax was paid on the transfer. Several months later, James sells the books to a professional collector for \$9,000. What is James 's gain or (loss) on the sale? (Points: 1)
\$1,000 gain
\$3,000 gain
\$4,000 gain
\$1,000 loss
\$3,000 loss

10. Fred receives a gift of rare books valued at \$7,000. The books have an adjusted basis of \$11,000 to the donor. No gift tax was paid on the transfer. Several months later, Fred sells the books to a professional collector for \$8,000. What is Fred 's gain or (loss) on the sale? (Points: 1)
\$1,000 gain
\$4,000 gain
No gain or loss is recognized
\$1,000 loss
\$3,000 loss

11. On May 13, 2007, Barbara receives a gift of a collection of books valued at \$10,000. The books have an adjusted basis of \$6,000 to the donor. They had been purchased in 1997. No gift tax was paid on the transfer. Several months after receiving the gift, Barbara sells the books to a professional collector for \$9,000. How is Barbara 's holding period for the books determined? (Points: 1)
It depends on whether a gift tax was paid at the time of the gift.
It begins in 1997.
It begins in 2007.
It is irrelevant because the transfer was a gift. Gifts are always considered to be held long-term.

12. Larry gives Linda 3,000 shares of stock he had purchased several years ago for \$8,000. On the date of the gif,t, the stock has a fair market value of \$6,000. Linda sells the 3000 shares for \$5,500 one month after the gift, Linda realizes a (Points: 1)
\$ - 0 - gain or loss
\$ 500 short-term capital loss
\$ 500 long-term capital loss
\$2,500 short-term capital loss
\$2,500 long-term capital loss

13. Emily inherits 1,000 shares of Lexus Airline Corporation stock from the estate of her Uncle Tony. Tony dies on August 4, 2007. The stock's value on August 4, 2007, is \$2,000. Tony's basis in the stock was \$3,000. The alternate valuation date is not used. Emily plans to sell the stock within the week following the transfer. What is Emily's basis in the stock? (Points: 1)
\$ - 0 -
\$1,000
\$2,000
\$3,000
\$4,000

14. Emily inherits 1,000 shares of Lexus Airline Corporation stock from the estate of her Uncle Tony. Tony dies on August 4, 2007. The stock's value on August 4, 2007, is \$2,000. Tony's basis in the stock was \$3,000. The alternate valuation date is not used. Emily sells the 1,000 shares for \$2,300 on September 8, 2007. What is Emily's holding period of the stock? (Points: 1)
Short-term.
Long-term.
Depends on which value is used.
Depends on whether an estate tax was paid.

15. If the executor of a decedent's estate elects the alternate valuation date and none of the estate's property is sold or distributed, the estate's assets are valued as of how many months after the date of death? (Points: 1)
0; date of death is the correct valuation date.
3 months.
6 months.
9 months.
12 months.

16. On February 3 of the current year, Marge converts her house to a rental property. Marge's adjusted basis in the house is \$180,000 and the fair market value is \$140,000 on the date of conversion. What is Marge's adjusted basis in the rental property for depreciation purposes? (Points: 1)
\$ - 0 -
\$ 40,000
\$140,000
\$180,000
\$155,000

17. On February 3 of the current year, Marge converts her house to a rental property. Marge's adjusted basis in the house is \$150,000 and the fair market value is \$120,000 on the date of conversion. Marge uses the rental for 3 years and properly deducts depreciation totaling \$12,000. Then, she sells the house for \$130,000. What is the amount of the gain or (loss) realized on the sale? (Points: 1)
No gain or loss
\$ 8,000 gain
\$20,000 loss
\$22,000 gain
\$ 8,000 loss

18. Jenny purchased 1,000 shares of Hewlett Corporation preferred stock for \$33,000 two years ago. During the current year, Jenny receives a 10% nontaxable stock dividend at a time when the stock has a fair market value of \$40. What is Jenny's basis in the stock dividend shares? (Points: 1)
\$ - 0 -
\$3,000
\$3,300
\$4,000
\$4,400

19. During 1995, Charles purchased 1,000 shares of Flagstaff Corporation stock for \$12,000. On February 22, 2007, he sells all the shares for \$9,000. On March 15, 2007, he repurchases 1,000 shares of Flagstaff for \$8,000 and holds them until May 29, 2007, when he sells them for \$10,000. What is Charles' realized gain or loss on the May 29, 2007, sale? (Points: 1)
\$1,000 loss.
\$2,000 gain.
\$2,000 loss.
\$1,000 gain.
\$ - 0 - gain or loss.
Submitted: 6 years ago.
Category: Homework
Expert:  Jesse Handel replied 6 years ago.

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Jesse Handel, Scientist
Category: Homework
Satisfied Customers: 307
Experience: BS Chem. and Bact. 10 yrs chemist. 10 yrs tax preparer.
Customer: replied 6 years ago.
Jesse,

12 out 19 right.

3. \$75,000 \$94,000
4. \$550       \$ \$750
6. \$60,000    \$35,556
8. \$60,000     \$66,500
11. It begins in 2007   It begins in 1997
12. \$500 short-term capital loss    \$500 short-term capital loss
19. \$2,000 gain     \$1,000 loss

Expert:  Jesse Handel replied 6 years ago.
Sorry it wasn't better. Thanks for asking for me.
Customer: replied 6 years ago.
<p>Hello Jesse,</p><p> </p><p>Are you up for some more tax questions. If so, I can be ready tomorrow mornig and the conditions of pay can remain the same (post \$9 and \$1 for every correct question answered). Please let me know if you can help. Thanks.</p>
Expert:  Jesse Handel replied 6 years ago.

HelloCustomer Tomorrow is a bad day for me. I will be traveling most of the day. The evening of Sunday the 21 would be better for me, if that works for you. The payment terms work fine for me.

You need to make sure that you request me on the actual questions. One of my colleagues moved the last answers into the homework category and, luckily, I had already posted my answers, otherwise we would have had to wait while the programmers moved it back to taxes.

Do you know what the topic will be for this next set of questions? Thanks, Jesse

Customer: replied 6 years ago.
Jesse, that is fine for me. Let's say around 1:30 pm. If not possible please suggest a good time for you. The topics are Property Dispositions and Nonrecognition Transactions. Thanks.
Expert:  Jesse Handel replied 6 years ago.
Great. Contact me tomorrow when you're ready. I'll let you know if there's any problems with that time.
Customer: replied 6 years ago.
Hello Jesse, I know you said this after noon but I notice that you are on line. So if now is possible that would be great.
Expert:  Jesse Handel replied 6 years ago.
SorryCustomer I won't be able to work with you for a couple of hours. But, I'll be happy to work with you then.
Customer: replied 6 years ago.
<p>That's fine.</p>
Expert:  Jesse Handel replied 6 years ago.
HelloCustomer I'm now free to work with you. Let me know when you're ready.
Customer: replied 6 years ago.
Ok, right now I am testing. How does 4pm sounds?
Expert:  Jesse Handel replied 6 years ago.
That's fine. I'll be ready then.
Customer: replied 6 years ago.
Hello Jesse.

Ijust posted the questions.
Expert:  Jesse Handel replied 6 years ago.
Thanks. I'll get started on them.
Expert:  Jesse Handel replied 6 years ago.

We have a problem with the new questions. The system has placed your question into the homework category and I can't answer them, because I'm a tax expert not a homework expert. I don't know if you can move them to the tax category yourself or if you'll have to reenter the questions as tax questions and then put a note in the first set of questions that you don't need those answered. I've been able to answer your other question even though they've been moved to the homework category, because I was already working on the questions when they were moved. Sorry about this, but the system strictly controls the number of experts in each category. I'll keep working on the questions while you see if you can move the questions or if you have to reenter them.

Customer: replied 6 years ago.
I am trying to move them
Expert:  Jesse Handel replied 6 years ago.
If you can't move them easily, just enter a question in tax questions with my name and the same price. You don't need to reenter the questions, because I already know them.

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