Margo receives a gift of real estate with an adjusted basis of $175,000 and a fa
ID: 2452809 • Letter: M
Question
Margo receives a gift of real estate with an adjusted basis of $175,000 and a fair market value of $100,000. The donor paid gift tax of $15,000 on the transfer.
If an amount is zero, enter "0".
Margo's basis for a gain is $ __________ and her basis for a loss is $_________ . If Margo later sells the property for $110,000, her recognized gain or loss is $_________ .
On July 16, 2015, Logan acquires land and a building for $500,000 to use in his sole proprietorship. Of the purchase price, $400,000 is allocated to the building, and $100,000 is allocated to the land. Cost recovery of $4,708 is deducted in 2015 for the building (nonresidential real estate).
a. What is the adjusted basis for the land and the building at the acquisition date?
Land _______
$
Building _______
$
b. What is the adjusted basis for the land and the building at the end of 2015?
Land _______
$
Building _______
$
Taylor is negotiating to buy some land and has two options. Under the first option, Taylor will give Ella $150,000 and assume her mortgage on the land for $100,000. Under the second option, Taylor will give Ella $250,000, and she will immediately pay off the mortgage. Taylor wants his basis for the land to be as high as possible. Given this objective, which option should Taylor select?
Taylor's basis in the land under Option 1 is $__________ .
Taylor's basis in the land under Option 2 is $__________ .
If a taxpayer sells property for cash, the amount realized consists of the net proceeds from the sale. For each of the following, indicate the effect on the amount realized.
Stock that has a basis to the purchaser of $6,000 and a fair market value of $10,000 is received by the seller as part of the consideration.
The receipt of the stock by the seller ( increases or decreases) the amount realized by the seller by $_____________.
Land _______
$
Building _______
$
Explanation / Answer
FMV (Fair market Value) is less than the adjusted Basis,then the gain or loss basis will be as follow:
1. Margo's basis for a gain is $ = $190000( Adjusted basis)
Margo's basis for a loss is $ = $ 100000 (FMV)
If Margo later sells the property for $110,000, her recognized gain or loss is $ = $ 0 , if sale price is between $100000 to $190000, there will be no gain or loss.
Note: New Adjusted basis = $175000 + $15000
= $190000
2. a) adjusted basis for the land and the building at the acquisition date
Land $100000
Building $400000
b) adjusted basis for the land and the building at the end of 2015
Land $100000
Building ( $400000 - $4708) = $395292
Note: Land remain unchanged because it is not depreciable assets