Ch 7 2024 ed

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School

Stockton University *

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Course

3122

Subject

Chemistry

Date

Jan 9, 2024

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docx

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3

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Ch 7 Homework 2024 ed 1. a. What do the terms “realized” and “recognized” gain or loss describe? Source______________________________ b. What is the formula for calculating Amount Realized? Source______________________________ c. What is the formula for computing Adjusted Basis? Source______________________________ 2. In 2023, Penelope Parker sold a piece of business machinery that had an adjusted basis to her of $150,000 for $175,000 cash plus artwork that had a fair market value of $25,000. The buyer assumed Penelope's $5,000 loan on the machinery and Penelope paid $2,000 in selling expenses. a. What is the amount of Penelope's realized gain on the sale? b. What is the amount of gain Penelope recognizes on the sale? Source______________________________ 3. On January 1, 2023, Barry Barker owned rental property which had an adjusted basis to him of $350,000. Daniel made the following expenditures during 2023: Ordinary painting of building $ 6,000 Repair of roof section (useful life not appreciably extended) 1,500 Legal fees paid to defend title 3,000 Property taxes 7,000 Assessment for local street improvement (value of property increased greatly) 5,000
In 2023, which of these expenditures does Barry capitalize and which does he expense? What is his adjusted basis in the building at year end? (Ignore depreciation.) Source_____________________________________ 4. Mom purchases 100 shares of APL stock on 1/1/2020 for $10,000. Mom sells 100 shares of APL stock to Son on 6/1/2023 for $8,000. Son sells stock to Friend on 9/1/2023 for $9,500. a. What is Mom’s amount realized, gain or loss realized, and gain or loss recognized on the sale to Son on 6/1/2023? b. What is Son’s amount realized, gain or loss realized, and gain or loss recognized on the sale to Friend on 9/1/23? Source_____________________________________ 5. Bugs McGee receives a 25% nontaxable stock dividend (25 shares) of Roberto Corporation common stock with a fair market value on the date of distribution of $1,000. Bugs previously owned 100 shares of Roberto Corporation common stock which he purchased ten years ago for $8,000. a. The basis per share of the 25 shares of Roberto Corporation stock is: b. The new basis per share of the original 100 shares of Roberto Corporation stock is: Source:___________________ 6. Cal Curns purchases furniture from his employer for $5,000 during 2023. The fair market value of the furniture is $8,500. a. What amount, if any, must Cal include as income for 2023? b. What is Cal's basis in the furniture? Source____________________________________
7. In 2023 Lulu Lowman sold her personal residence for $300,000 that she owned and lived in since 2009. When selling the property, Lulu paid the real estate agents a commission of $18,000. In 2009, Lulu had paid $200,000 for the home and currently owes $110,000 on the mortgage. Over the years, Lulu updated the kitchen and bathrooms, amounting to $44,000. When she decided to sell the home, she spent $2,000 to paint the interior, spruce up the landscaping and steam clean the carpets. What is Lulu’s (a) amount realized, (b) adjusted basis, (c) gain or loss realized, and (d) gain or loss recognized. Explain. Source______________________________ 8. October 7, 2023, Grace Gems purchased a going business for the lump-sum price of $200,000. The fair market values of the assets Grace purchased were as follows: Inventory $10,000 Land 36,000 Building 90,000 Equipment 15,000 Furniture 9,000 What is Grace's basis in each of the assets? Source______________________________
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