ACCT 323 Homework 5 Solution

ACCT 323 Homework 5 Solution

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ACCT 323 Homework 5 Solution

1. Umair sold some equipment he used in his business on August 29, 2014, that

was originally purchased for $70,000 on November 21, 2013. The equipment

was depreciated using the 7-year MACRS method for a total of $18,574.

Assume there is no additional netting of gains and losses for this taxpayer.

a. Assume Umair sold the equipment for $50,000:

(1) What is the amount of realized gain or loss on the sale of the

equipment?

(2) Is the nature of the gain or loss considered ordinary or long-term?

b. Assume Umair sold the equipment for $60,000:

(1) What is the amount of realized gain or loss realized on the sale of the

equipment?

(2) Is the nature of the gain or loss considered ordinary or long-term?

2. Alice owns undeveloped land with an adjusted basis of $140,000. She sells the

property to George for $185,000.

a. What is Alice’s realized and recognized gain?

b. What IRC section does the gain on the property apply?

c. If the land is used in a trade or business, what IRC section does the gain on

the property apply?

3. Using the following independent situations, answer the following questions:

Situation 1

Clara received from her Aunt Sona property with an FMV at the date of the gift

of $40,000. Aunt Sona purchased the property five years ago for $35,000.

Clara sold the property for $43,000. Assume Aunt Sona does not have MAGI

of over $200,000.

a . Whaat .i s the basis to Clara?

b . Whabt .i s Clara’s gain on the sale?

c. If Clacr.a is in the 33% tax bracket, what is the tax on the gain

(assuming she has no other gains/losses to be netted)?

d . If Cladr.a is in the 15% tax bracket, what is the tax on the gain

(assuming she has no other gains/losses to be netted)?

Situation 2

Clara received from her Aunt Sona property with a FMV at the date of the gift

of $30,000. Aunt Sona purchased the property five years ago for $35,000.

a . If Claar.a sold the property for $43,000, what is her gain or loss on

the sale?

b . If Clabr.a sold the property for $33,000, what is her gain or loss on

the sale?

c. If Clacr.a sold the property for $28,000, what is her gain or loss on

the sale?

4. Ramon received a gift of stock from his uncle. The basis of the stock to his

uncle was $20,000, and it had a FMV of $13,000 at the date of the gift. The

donor held the property for more than one year. Complete the following chart

under the independent situations shown:

Situation 1 Situation 2 Situation 3

Donor’s basis $20,000 $20,000 $20,000

FMV at gift date 13,000 13,000 13,000

Ramon’s selling price 25,000 10,000 15,000

Basis to Ramon

Taxable gain (if any)

Deductible loss (if any)