41. Mixed-Use Asset Wilma does secretarial work out of her
home. She purchased her own computer that she uses for 2,250 hours for her work
during the year; her children, however, also use the computer for 250 hours to
do their homework. She paid $4,000 for the computer and had claimed $2,200 of
depreciation on it when she sold it for $1,100. Determine the amount and type
of her gain or loss realized on the sale of the computer.
42. Sale of Personal Residence Tina and Tony, a married
couple, have owned and lived in their house for 20 years. They want to sell it
now and move to a smaller place. They purchased the home for $56,000 and put
$30,000 of improvements into the home over the years. If they sell the house
for $387,000, what is their realized and recognized gain?
43. Sale of Personal Residence Carlotta moved into a smaller
home nine months ago, after her husband died. She sold the home that they had
lived in together for fifteen years and elected Section 121 so she would not
have to recognize the $150,000 of gain on that home. She then purchased the
smaller home for $210,000. She is unhappy in the neighborhood after living
there for 10 months and wants to move again. If she sells the home for
$235,000, what is her realized and recognized gain? How would your answer
change if Carlotta were forced to move into a nursing home because of her
health?
44. Related Party Transaction Marilyn owned 500 shares of
Ibis stock that she purchased several years ago for $25,000. This year, she
sold 200 of the shares to her brother for $7,000, its fair market value, when
she wanted money for some plastic surgery. Determine Marilyn’s realized and
recognized gain or loss on the sale and her basis in the 300 shares remaining.
Determine her brother’s basis in the purchased stock and his realized and
recognized gain or loss if he sells the shares for $12,000 the following year.
45. Related Party Transaction William bought 1,000 shares of
Bevo stock three years ago for $100 per share. This year he has a $20,000
short-term capital gain from the sale of his shares of an initial public
offering of GBD Company stock. To offset the gain, William sells his shares of
Bevo to his grandfather for $80,000, its current fair market value. The next
month, William’s grandfather sells the stock for $85,000 to his neighbor.
Determine William’s realized and recognized gain or loss on the sale of Bevo
stock. Determine the grandfather’s basis in the stock purchased from William
and his realized and recognized gain or loss when he sells the stock to his
neighbor.
46. Capital Asset Netting Bill had the following gains and
losses on asset sales: $500 gain on stock held 11 months; a $2,300 gain on land
held two years; $1,900 loss on gold
coins held two years; $1,200 gain on antique toys held three years; and a
$1,300 loss on investment land held six months. Determine Bill’s net capital
gain or loss, the capital gains rate that applies to each asset sale and the
capital gains rate(s) that would apply to the final net capital gain assuming
Bill is in the 35 percent marginal tax bracket.
47. Income Tax
Liability Clarice became very ill in February of 2011 and was unable to work
the rest of the year. She had only $12,000 of income from her sole
proprietorship for the time she worked and was forced to sell the following
investments to pay for her living expenses. She sold 10,000 shares of BBC stock
purchased two years ago for $34,000 (basis = $16,000) and a coin collection she
inherited from her grandfather many years ago for $55,000 (basis = $30,000). If
Clarice is single and has no dependents, determine her taxable income and her
income tax liability for 2011.
48. Income Tax
Liability Al Shalou, a single individual, had only $14,000 of salary income in
2011, but he had a number of property transactions during the year with the
following results: a. $26,000 Section 1202 gain on ABC stock b. $5,000
short-term capital loss on Zephyr bonds c. $24,000 long-term capital loss on
Magnum stock d. $13,000 Section 1245 recapture and $3,000 Section 1231 gain on
equipment e. $8,000 long-term capital loss on a coin collection f. $6,000
Section 1231 loss on a machine g. $20,000 long-term capital gain on Jobe stock
Calculate Shalou’s taxable income and his income tax liability for 2011.
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