Category: Writing

a. What is the current adjusted basis of the house?
b. Mrs. Self is an employee of Bulldog Consulting and has a
nice office on the business premises; however, she finds it helpful to use one
of the bedrooms as an office to do work in the evenings and on weekends. May
the Selfs claim a deduction for depreciation?
c. Determine their recognized gain and character if they
sell the house today for $2.8 million.
d. If the property is owned by Mrs. Self instead of owned
jointly, determine their recognized gain and character if they sell the house
today for $2.8 million.
e. If the property is owned by Mrs. Self instead of owned
jointly and Mr. Self dies, will the basis of the house be increased?
f. Determine their recognized gain if they exchange the
house today for an apartment complex valued at $2.8 million. The Selfs will
purchase another house and hire someone ro manage the apartment complex.
g. If the house is destroyed by a fire when its FMV is $2.8
million and the Selfs receive $2.6 million, determine their casualty loss
deduction and gain recognized, if any. The Selfs do nor plan to purchase
another residence.
h. If the Selfs want ro purchase another principal residence
after collecting the insurance in part g. above, what is the minimum amount
they would have ro pay for the new residence to avoid recognizing any gain?

Sale or Other Disposition of a Principal Residence. In 1971,
Mr. and Mrs. Self purchased their first principal residence for $80,000. In
1996, they sold the house for $300,000 and purchased a new residence for $1.5
million. At chat time, the Selfs were allowed to defer the $220,000 gain
because they purchased a more expensive residence, bur the basis of the
residence was reduced by the gain deferred. The Taxpayer Relief Act of 1997
eliminated this deferral provision and made it easier for taxpayers who sell a
principal residence to exclude the gain resulting from the sale even if they do
not purchase a replacement residence. In 2002, the Selfs spent $200,000 to add
a porch to their house chat overlooks the small pond behind their house. In
2005, they hired painters to paint the entire house at a cost of $18,000. They
estimate that $20,000 has been spent on routine repairs since 1996, but
insurance of $11,000 was collected for the repairs resulting from a small
tornado in 2009. No casualty loss deduction was allowed. They hold the
residence as joint tenants.

Sale of a Principal Residence. Mr. and Mrs. Kitchens
purchased their first home in Ohio for $135,000 on October 1, 2018. Because Mr.
Kitchens’ employer transferred him to Utah, they sold the house for $160,000 on
January 10, 2019. How much of the gain is recognized?

Involuntary Conversion of Principal Residence. Mr. and Mrs.
Snell own and live in a house, with an adjusted basis of $300,000, char was
purchased in 1995. The house is destroyed by a tornado on March 10 of the
current year, and the Snells receive insurance proceeds of $410,000. They
purchase another residence for $480,000 four months lacer.
a. May they exclude the $110,000 gain, and if so, what is
the basis of the residence purchased in July?
b. May they defer the $110,000 gain, and if so, what is the
basis of the residence purchased in July?

Like-Kind Property. Which of the following exchanges qualify
as like-kind exchanges
under Sec. 1031?
a. A motel in Texas for a motel in Italy
b. An office building held for investment for an airplane to
be used in the taxpayer’s
business
c. Land held for investment for marketable securities held
for investment
d. Land held for investment for a farm co be used in the
taxpa yer’s business

Like-Kind Property. Which of the following exchanges qualify
as like-kind exchanges
under Sec. 1031?
a. Acme Corporation stock held for investment purposes for
Mesa Corporation stock
also held for investment purposes
b. A motel used in a trade or business for an apartment
complex held for investment
c. A pecan orchard in Texas used in a trade or business for
an orange grove in Florida
used in a trade or business
d. A one-third interest in a general partnership for a
one-fourth interest in a limited
partnership
e. Inventory for equipment used in a trade or business
f. Unimproved land held as an investment for a warehouse
used in a trade or business
g. An automobile used as a personal -use asset for
marketable securities held for investment

Chauvin Housing Corporat ion operates primarily in the
United States and owns a large houseboat that can provide sleeping accommodat
ions for as many as ninety ind ividuals. Chauvin is considering a possible
exchange of its houseboat, with an adjusted basis of $3,000,000, for a new
houseboat with a FMV of $7,000,000. Chauv in will also need to pay $1,200,000
cash . Chauvin is considering the possible relocation of the houseboat to
Finland . What tax issues should Chauvin consider?

Steve maintains that the cost of wallpaper ing his three
-bedroom house is a capita l expenditure wh ile Martha maintains that the cost
of wallpa – pering her three-bedroom house is an expense. Steve uses his house
as his persona l residence wh ile Martha’s house is renta l property. Explain
why Steve and Martha view the cost of wallpa – pering differently.

1.When may a sale of real property and a subsequent purchase
of real property be created as a like-kind exchange?
2. When determining whether property qualifies as like-kind
property, is the quality or grade of the property considered?
3. When does a nonsimulcaneous exchange qualify as a
like-kind exchange?

Kay owns real property used in her business and
exchanges the property for ocher like-kind real
property and marketable securities.
a. Will Kay’s recognized gain ever exceed the realized gain?
b. Will Kay’s recognized gain ever exceed the
FMV of the marketable securities?
c. What is the basis of the marketable securities
received?
d. When does the holding period of the market –
able securities begin?