Question 1. Parker bought a brand new Ferrari on January 1, 2

1. Parker bought a brand new Ferrari on January 1, 2014, for $125,000. Parker was fatally injured in an auto accident on June 23, 2014, when the fair market value of the car was $105,000. Parker was driving a loaner car from the Ferrari dealership while his car was being serviced. In his will, Parker left the Ferrari to his best friend, Ryan. Ryan’s holding period for the Ferrari begins on January 1, 2014.

a. True

b. False

2. Transactions between related parties that result in disallowed losses might later provide a tax benefit to the related party buyer.

a. True

b. False

3. For the loss disallowance provision under § 267, related parties include certain family members, a shareholder and his or her controlled corporation (i.e., greater than 50% in value of the corporation’s outstanding stock), and a partner and his or her controlled partnership (i.e., greater than 50% of the capital interests or profits interest in the partnership).

a. True

b. False

4. If losses are disallowed in a related party transaction, the holding period for the buyer includes the holding period of the seller.

a. True

b. False

5. Ben sells stock (adjusted basis of $25,000) to his son, Ray, for its fair market value of $15,000. Ray gives the stock to his daughter, Trish, who subsequently sells it for $26,000. Ben’s recognized loss is $0 and Trish’s recognized gain is $1,000 ($26,000 – $15,000 – $10,000).

a. True

b. False

6. The basis of property acquired in a wash sale is its cost plus the loss notrecognized on the wash sale.

a. True

b. False

7. Realized losses from the sale or exchange of stock are disallowed if within 30 days before or 30 days after the sale or exchange, the taxpayer acquires substantially identical stock.

a. True

b. False

8. Gene purchased an SUV for $45,000 which he uses 100% for personal purposes. When the SUV is worth $30,000, he contributes it to his business. The gain basis is $45,000, the loss basis is $30,000, and the basis for cost recovery is $45,000.

a. True

b. False

9. If property that has been converted from personal use to business use has appreciated in value, its basis for gain will be the same as the basis for loss.

a. True

b. False

10.The basis for gain and loss of personal use property converted to business use is the lower of the adjusted basis or the fair market value on the date of conversion.

a. True

b. False

11.Stuart owns land with an adjusted basis of $190,000 and a fair market value of $500,000. If the property is going to be given to Stuart’s nephew, Alex, it is preferable for the transfer to be by inheritance rather than by gift.

a. True

b. False

12.The taxpayer owns stock with an adjusted basis of $15,000 and a fair market value of $8,000. If the stock or cash is going to be given to her niece, it is preferable for the taxpayer to sell the stock and give the $8,0

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