Farhad canceled a note issued by Emma (Farhad's niece) that arose in connection with the sale of property. At the time of the cancellation, the note had a basis to Farhad of $277,400, a face amount of $499,320, and a fair market value of $374,490. Presuming that the initial sale by Farhad qualified as an installment sale, how much gain does the cancellation result in for Farhad? 13,000 X
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- Rafael sold an asset to Jamal. What is Rafael's amount realized on the sale in each of the following alternative scenarios? b. Rafael received $91,000 cash and was relieved of a $35,750 mortgage on the asset he sold to Jamal. Rafael also paid a commission of $9,400 on the transaction. Amount realizedPeter Diamond owed Carter $500,000 secured by a first mortgage on Diamond’s plant and land. Stephens was a surety on this obligation in the amount of $250,000. After Diamond defaulted on the debt, Carter demanded and received payment of $250,000 from Stephens. Carter then foreclosed upon the mortgage and sold the property for $375,000. What rights, if any, does Stephens have in the proceeds from the sale of the property?Jessica sold goods to Stacy for $2,500 and retained a security interest in them. Two months later, Stacy filed a voluntary petition in bankruptcy. At this time, Stacy still owed Jessica $2,000 for the purchase price of the goods, the value of which was $1,500. a. May the trustee invalidate Jessica’s security interest? If so, under what provision? b. If the security interest is invalidated, what is Jessica’s status in the bankruptcy proceeding? c. If the security interest is not invalidated, what is Jessica’s status in the bankruptcy proceeding?
- Frank's Mini Mart sold a piece of equipment on an installment agreement, to a competitor on the other side of town. The other owner failed to make the payments and Frank had to repossess the equipment. What is Frank's gain or loss on repossessed personal property with a fair market value of $12,000 on the date of repossession, where the seller's basis in the installment obligation at the time of repossession is $7,500, and the costs of repossession were $500? (a) Loss of $500. (b) Gain of $4,000. (c) Gain of $4,500 (d) Gain of $5,000.Andrew purchased a residential rental property for $245,000. He made a down payment of $20,000 and secured a nonrecourse loan for $225,000. Andrew defaulted on the loan when the balance of the note was $210,000 and his adjusted basis in the property after depreciation claimed was $223,000. Fair market value of the property at the time of foreclosure was $205,000. What is Andrew's realized amount from the foreclosure? $205,000 $210,000 $223,000 $225,000A buyer purchases property for $45,000 in cash and assumes the seller's outstanding mortgage balance of $98,500. The lender executes a release for the seller. The buyer fails to make any mortgage payments, and the lender forecloses. At the foreclosure sale, the property is sold for $75,000. Based on these facts, unless state law provides anti-deficiency protection, who is liable, and for what amount? The seller is solely liable for $23,500. The buyer is solely liable for $23,500. The buyer and the seller are equally liable for $23,500. The buyer is solely liable for $30,000
- Rafael sold an asset to Jamal. What is Rafael's amount realized on the sale in each of the following alternative scenarios? a. Rafael received $126,500 cash and a vehicle worth $15,900. Rafael also paid $8,850 in selling expenses. b. Rafael received $118,000 cash and was relieved of a $27,750 mortgage on the asset he sold to Jamal. Rafael also paid a commission of $6,600 on the transaction. Alan Meer inherits a hotel from his grandmother, Mary, on February 11 of the current year. Mary bought the hotel for $730,000 three years ago. Mary deducted $27,000 of cost recovery on the hotel before her death. The fair market value of the hotel in February is $725,000. (Assume that the alternative valuation date is not used.) a. What is Alan’s adjusted basis in the hotel?Jesse sold her property for $50,000 under an installment agreement. She had no debts on theproperty at the time of sale. The adjusted basis of the property was $35,000 and the sellingexpenses totaled $5,000. When gains are recognized in periods subsequent to the year ofsale, those gains will be apportioned using what rate?a) 25%b) 30%c) 20%d) 40%Verlin sells a commercial building and receives $50,000 in cash and a note for $60,000 at 10 percent interest. Verlin's adjusted basis in the building on the date of sale is $45,000 and he collects only the $50,000 down payment in the year of the sale. a. If Verlin elects to recognize the total gain on the property in the year of sale, calculate the taxable gain. b. Assuming Verlin uses the installment sale method, calculate the taxable gain he must report for the year of the sale. c. Assuming Verlin collects $10,000 (not including interest) of the note principal in the year following the year of sale, calculate the amount of income recognized under the installment sale method.
- Bernadette sold her home. She received cash of $40,000, the buyer assumed her mortgage of $180,000, and she paid closing costs of $2,300 and a broker’s commission of $7,000. What is the amount realized on the sale? If she has a basis in the home of $138,000, what is her realized gain or loss on the sale? What is the character of the recognized gain or loss? How would your answer to (c) change if Bernadette sold a building used by her sole proprietorship rather than her personal residence?O Sebastian originally sold his home in an installment sale for $300,000. At the time, his adjusted basis in the home was $220,000. He qualified for the Section 121 principal residence exclusion, so his gain was not included in his taxable income for the year of sale. Three years later, he repossessed the home from the buyer when the balance of the note was $275,000. He spent $8,000 on improvements and resold it within the year for $320,000. What is Sebastian's recomputed adjusted basis in the property? $228,000 $258,000 $278,000 $308,000On May 31, 2021, Joe's Car Lot sold Anthony a used car on account for $20,000. Joe's Car Lot uses the accrual method. In 2022, after $6,000 of payments had been made, Anthony filed for bankruptcy and Joe's Car Lot was notified that he could not expect to receive any of the amount owed to him. In 2023 final settlement was made and Joe's Car Lot received $7,000. How much bad debt loss can Joe's Car Lot deduct on his tax return in 2022? Options: a.) $3,000 b.) $0 c.) $14,000 d.) $7,000 e.) $6,000