Individual Income Taxes
43rd Edition
ISBN: 9780357109731
Author: Hoffman
Publisher: CENGAGE LEARNING - CONSIGNMENT
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 15, Problem 6DQ
LO.2 Ross would like to dispose of some land he acquired five years ago because he believes it will not continue to appreciate. Its value has increased by $50,000 over the five-year period. He also intends to sell stock that has declined in value by $50,000 during the eight-month period he has owned it.
Ross has four offers to acquire the stock and land. Identify the tax issues relevant to Ross in disposing of this land and stock.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
3
Patty Purchaser purchases Blackacre, 175 acres of unimproved land for $4 million. Three years later, she enters into a contract to sell Blackacre to a third party for $7 million and comes to you as her trusted advisor to advise her of the tax consequences of the sale. What do you tell her?
Six years ago, Donna purchased land as an investment. The land cost $150,000 and is now worth $480,000. Donna plans to transfer the land to Development
Corporation, which will subdivide it and sell individual tracts. Development's income on the land sales will be ordinary in character.
Read the requirements.
Requirement a. What are the tax consequences of the asset transfer and land sales if Donna contributes the land to Development in exchange for all its stock?
on the transfer of land to Development Corporation.
Donna recognizes
no gain or loss
Development's basis in the land will be $ 150,000. All gain on the subsequent sales will be
to Development.
This alternative results in the pre-contribution gain
post-contribution profit
earned from subdividing the land
ordinary income
that accrued prior to Donna's transfer and the
being taxed at a 21% tax rate.
Requirement b. In what alternative ways can the transaction be structured to achieve more favorable tax results? Assume Donna's…
* Explain.
Chapter 15 Solutions
Individual Income Taxes
Ch. 15 - Prob. 1DQCh. 15 - Prob. 2DQCh. 15 - Prob. 3DQCh. 15 - Prob. 4DQCh. 15 - LO.2 Melissa owns a residential lot in Spring...Ch. 15 - LO.2 Ross would like to dispose of some land he...Ch. 15 - Prob. 7DQCh. 15 - Prob. 8DQCh. 15 - Prob. 9DQCh. 15 - Prob. 10DQ
Ch. 15 - Prob. 11DQCh. 15 - LO.3 Reba, a calendar year taxpayer, owns an...Ch. 15 - Prob. 13DQCh. 15 - Prob. 14DQCh. 15 - Prob. 15DQCh. 15 - Prob. 16CECh. 15 - Prob. 17CECh. 15 - Prob. 18CECh. 15 - Prob. 19CECh. 15 - LO.3 On June 5, 2019, Brown, Inc., a calendar year...Ch. 15 - LO.3 Camilos property, with an adjusted basis of...Ch. 15 - Prob. 22CECh. 15 - Prob. 23CECh. 15 - Prob. 24CECh. 15 - Prob. 25CECh. 15 - Prob. 26CECh. 15 - Prob. 27PCh. 15 - Prob. 28PCh. 15 - Prob. 29PCh. 15 - Prob. 30PCh. 15 - Prob. 31PCh. 15 - Prob. 32PCh. 15 - Prob. 33PCh. 15 - Ed owns investment land with an adjusted basis of...Ch. 15 - Prob. 35PCh. 15 - Prob. 36PCh. 15 - Prob. 37PCh. 15 - Prob. 38PCh. 15 - Prob. 39PCh. 15 - Prob. 40PCh. 15 - LO.3 Howards roadside vegetable stand (adjusted...Ch. 15 - Prob. 42PCh. 15 - Prob. 43PCh. 15 - Prob. 44PCh. 15 - Prob. 45PCh. 15 - Prob. 46PCh. 15 - What are the maximum postponed gain or loss and...Ch. 15 - Prob. 48PCh. 15 - Prob. 49PCh. 15 - Prob. 50PCh. 15 - Prob. 51PCh. 15 - Prob. 52PCh. 15 - Prob. 53PCh. 15 - Prob. 54PCh. 15 - Prob. 55PCh. 15 - Prob. 56PCh. 15 - Devon Bishop, age 45, is single. He lives at 1507...Ch. 15 - Prob. 1RPCh. 15 - Prob. 2RPCh. 15 - Taylor owns a 150-unit motel that was constructed...Ch. 15 - Prob. 6RPCh. 15 - Prob. 1CPACh. 15 - Susie purchased her primary residence on March 15,...Ch. 15 - Chad owned an office building that was destroyed...Ch. 15 - Prob. 4CPACh. 15 - Marsha exchanged land used in her business in...Ch. 15 - Prob. 6CPACh. 15 - Prob. 7CPA
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Floyd, a cash basis taxpayer, has received an offer to purchase his land. The cash basis buyer will pay him either 100,000 at closing or 50,000 at closing and 56,000 two years after the date of closing. If Floyd recognizes the entire gain in the current year, his marginal tax rate will be 25% (combined Federal and state rates). However, if he spreads the gain over the two years, his combined marginal tax rate on the gain will be only 20%. Floyd does not consider the buyer a credit risk, and he understands that shifting the gain to next year with an installment sale will save taxes. Still, he realizes that the deferred payment will, in effect, earn only 6,000 for waiting two years for the other 50,000. Floyd believes he can earn a 10% before-tax rate of return on his after-tax cash. Floyds adjusted basis for the land is 25,000, the buyer is also a cash basis taxpayer, and the short-term Federal rate is 4%. Floyd has asked you to evaluate the two alternatives on an after-tax basis.arrow_forwardOn September 30 of last year, Rex received some investment land from Holly as a gift. Holly’s adjusted basis was $50,000 and the land was valued at $40,000 at the time of the gift. Holly acquired the land five years ago. What is the amount and character of Rex’s recognized gain (loss) if he sells the land on May 12 this year at the following prices? (Enter NA if a situation is not applicable. Leave no answer blank. Enter zero if applicable.) a. $32,000 b. $70,000 c. $45,000arrow_forwardOn September 30 of last year, Rex received some investment land from Holly as a gift. Holly's adjusted basis was $50,000 and the land was valued at $40,000 at the time of the gift. Holly acquired the land five years ago. What are the amount and character of Rex's recognized gain (loss) if he sells the land on May 12 this year at the following prices? (Enter NA if a situation is not applicable. Leave no answer blank. Enter zero if applicable.) b. Land sold for $70,000 Amountarrow_forward
- On September 30 of last year, Rex received some investment land from Holly as a gift. Holly's adjusted basis was $50,000 and the land was valued at $40,000 at the time of the gift. Holly acquired the land five years ago. What are the amount and character of Rex's recognized gain (loss) if he sells the land on May 12 this year at the following prices? (Enter NA if a situation is not applicable. Leave no answer blank. Enter zero if applicable.) a. Land sold for $32,000 Amountarrow_forwardOlivia wishes to purchase some undeveloped land for investment purposes. She is unable to pay the whole purchasing price. Instead, Olivia pays the landowner $51,900 in exchange for the right to purchase the land for $1,038,000 at any time over the following four years. Olivia sells the option for $64,875, 14 months after obtaining it. What is the size and nature of Olivia's gain or loss? She has a $ lengthy capital gain.arrow_forwardQuestion: Surendra's personal residence originally cost $340,000 (ignoring the value of the land). After living in the house for five years, he converts it to rental property. At the date of conversion, the fair market value of the house is $320,000. As to the rental property, calculate Surendra's basis for: Loss. Depreciation. Gain. Could Surendra have obtained better tax results if he had sold his personal residence for $320,000 and then purchased another house for $320,000 to hold as rental property? Explain. Summarize your answer to this problem in an e-mail to your instructorarrow_forward
- a) Arijit sold a piece of land for $ 110,000 cash. Arijit originally purchased the land for 68,000 and there are no liens or other obligations attached to the land. What is the gain or loss that Arijit will recognize for income tax purposes? b) If Arijit had sold the land for $ 110,000 for which he had paid $ 144,000 and the buyer also assumed a $ 30,000 note payable attached to the land what would be Arijit's gain or loss from the sale?arrow_forwardJacob has a parcel of vacant land that he had purchased as an investment. The land has an adjusted cost base of $156,000 to Jacob. The fair market value of the land on January 1 of the current taxation year is $167,500. On this date, Jacob gifts the property to his 14-year-old daughter, Tabitha. Tabitha subsequently sells the land on December 1 of the current year for its fair market value of $200,000. How much gain will each recognize on this series of transactions? Choose the correct answer. O A. Jacob, $32,500; Tabitha, $11,500 O B. Jacob, $44,000; Tabitha So C. Jacob, $11,500; Tabitha, $32,500 O D. Jacob, $0; Tabitha, S44,000arrow_forwardJacob has a parcel of vacant land that he had purchased as an investment. The land has an adjusted cost base of $156,000 to Jacob. The fair market value of the land on January 1 of the current taxation year is $167,500. On this date, Jacob gifts the property to his 14-year-old daughter, Tabitha. Tabitha subsequently sells the land on December 1 of the current year for its fair market value of $200,000. How much gain will each recognize on this series of transactions? .....arrow_forward
- Please show the worksarrow_forwardBrian purchased a block of land in June 1987 for $110,000. At the time that he acquired the land he did not anticipate selling it in the near future. He purchased and held the land because he considered that the land represented a safe investment for his money and that generally land prices went up with inflation. Brian sold the land for $250,000 in the current income year. Which of the following statements about Brian is most correct? a. The amount is not ordinary income but may be assessed under the capital gains provisions. b. The entire $250,000 is ordinary income. c. Section 15-15 ITAA97 will apply to make the amount of $140,000 assessable income. d. Section 25A ITAA36 will apply to make the amount of $140,000 assessable income.arrow_forward1 Jamie plans to transfer a piece of equipment which is capital property to him, to a corporation he owns. The equipment has an Adjusted Cost Base (ACB) of $90,000, a Undepreciated Capital Cost (UCC) balance of $60,000 and a Fair Market Value (FMV) of $70,000. Jamie has $10,000 in taxable capital losses that he is concerned he won't be able to use in the future. What would you recommend to Jamie as an elected amount if he wants to defer as much tax as he can and use the losses?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT
Individual Income Taxes
Accounting
ISBN:9780357109731
Author:Hoffman
Publisher:CENGAGE LEARNING - CONSIGNMENT
How to (Legally) Never Pay Taxes Again; Author: Next Level Life;https://www.youtube.com/watch?v=q63F1pBrUHA;License: Standard Youtube License