Question 224. Use the following data to determine the sales

224. Use the following data to determine the sales price of Etta’s principal residence and the realized gain. She is not married. The sale of the old residence qualifies for the § 121 exclusion.

225. Liz, age 55, sells her principal residence for $600,000. She purchased it twenty-two years ago for $175,000. Selling expenses are $30,000 and repair expenses to get the house in a marketable condition to sell are $15,000. Liz’s objective is to minimize the taxes she must pay associated with the sale. Calculate her recognized gain.

226. Mandy and Greta form Tan, Inc., by transferring the following assets to the corporation in exchange for 5,000 shares of stock each.

Mandy: Cash of $450,000

Greta: Land (worth $450,000; adjusted basis of $90,000).

How much gain must Tan recognize on the receipt of these assets?

227. Beth sells investment land (adjusted basis of $225,000) that she has owned for 6 years to her husband, Richard, for its fair market value of $195,000.

a. Calculate Beth’s recognized gain or loss.

b. Calculate Richard’s basis for the land.

c. How would your answers in a. and b. change if Beth and Richard were not married (i.e., merely good friends)?

d. Would the answer in a. and b. change if the selling price was $270,000?

228. After 5 years of marriage, Dave and Janet decided to get a divorce. As part of the divorce settlement, Janet transfers to Dave the house she purchased prior to their marriage. Janet’s adjusted basis for the house is $230,000 and the fair market value is $410,000 on the date of the transfer. What are the tax consequences to Janet and to Dave as a result of the transfer?

229. When a property transaction occurs, what four questions should be considered with respect to the sale or other disposition?

230.Discuss the effect of a liability assumption on the seller’s amount realized and the buyer’s adjusted basis.

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231.Define fair market value as it relates to property transactions.

232.What is the general formula for calculating the adjusted basis of property?

233. What is the difference between the depreciation (or cost recovery) allowed and the depreciation (or cost recovery) allowable and what effect does each have on the adjusted basis of property?

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234.What effect does a deductible casualty loss have on the adjusted basis of property?

235. For a corporate distribution of cash or other property to a shareholder, when does dividend income or a return of capital result?

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236. Under what circumstances will a distribution by a corporation to its only shareholder result in a capital gain?