15. LO.2 Wanda is considering selling two personal use assets that she owns. One has appreciated in value by $20,000, and the other has declined in value by $17,000. Wanda believes that she should sell both assets in the same tax year so that the loss of $17,000 can offset the gain of $20,000.
a. Advise Wanda regarding the tax consequences of her plan.
b. Could Wanda achieve better tax results by selling the assets in different tax years?
31. LO.1 Norm is negotiating the sale of a tract of his land to Pat. Use the following classification scheme to classify each of the items contained in the proposed sales contract:
DARN = Decreases amount realized by Norm
IARN = Increases amount realized by Norm
DABN = Decreases adjusted basis to Norm
IABN = Increases adjusted basis to Norm
DABP = Decreases adjusted basis to Pat
IABP = Increases adjusted basis to Pat
a. Norm is to receive cash of $50,000.
b. Norm is to receive Pat’s note payable for $25,000, payable in three years.
c. Pat assumes Norm’s mortgage of $5,000 on the land.
d. Pat agrees to pay the realtor’s sales commission of $8,000.
e. Pat agrees to pay the property taxes on the land for the entire year. If each party paid his or her respective share, Norm’s share would be $1,000 and Pat’s share would be $3,000.
f. Pat pays legal fees of $500.
g. Norm pays legal fees of $750.
25. LO.4 Arnold, who is single, sold his principal residence on April 10, 2013, and excluded the realized gain under § 121 (exclusion on the sale of a principal residence).
On April 12, 2013, he purchased another principal residence, which he sells on January 12,
2014, for a realized gain of $80,000. Can Arnold exclude the $80,000 realized gain on the
January 2014 sale if his reason for selling was:
a. His noisy neighbors? Explain.
b. A job transfer to another city? Explain.
41. Determine the realized, recognized, and postponed gain or loss and the new basis for each of the following like-kind exchanges:
Of Old Machine Boots Given Fair Market Value
Of New Asset Boot Received
a. $7,000 $-0- $12,000 $4,000
b. 14,000 2,000 15,000 -0-
c. 3,000 7,000 8,000 500
d. 15,000 -0- 29,000 -0-
e. 10,000 -0- 11,000 1,000
f. 17,000 -0- 14,000 -0-
16. LO.5 After netting all of her short-term and long-term capital gains and losses, Misty has a net short-term capital loss and a net long-term capital loss. Can she net these against each other? Why or why not?
18. LO.2, 5, 7 Near the end of 2013, Byron realizes that he has a net short-term capital loss of $13,000 for the year. Byron has taxable income (not including the loss) of $123,000 and is single. He owns numerous stocks that could be sold for a long-term capital gain. What should he do before the end of 2013?
22. LO.2, 4 Barbella purchased a wedding ring for $15 at a yard sale in May. She thought the ring was costume jewelry, but it turned out to be a real diamond ring. She is not in the business of buying and selling anything. She researched the ring on the Internet and discovered that it was worth at least $1,000. She sold it on an Internet auction site for $1,100 in July. Was the ring a capital asset? What were the amount and nature of the gain or loss from its sale by Barbella?