Posted: December 8th, 2015
Any reference to the Code is to the Internal Revenue Code of 1986, as amended.
There are 2 essay questions (with multiple parts to each) requiring concise answers. Essay One is worth a maximum total of 21 points (7 parts with a maximum of 3 points each) and Essay Two is worth a maximum total of 12 points (3 parts with a maximum of 4 points each).
Please answer each of the following questions. In addition to choosing the correct answer, please concisely explain why the chosen answer is correct, what primary sources and what secondary sources you used in reaching your conclusion. Please be specific and advise as to which of the tax service databases you used and what materials in the database assisted you in reaching your conclusion.
Essay One
Part 1 – Bob owned a duplex used as rental property. The duplex had an adjusted basis to Bob of $86,000 and a fair market value of $300,000. Bob transferred the duplex to his brother, Carl, in exchange for a triplex that Carl owned. The triplex had an adjusted basis to Carl of $279,000 and a fair market value of $300,000. Two months after the exchange, Carl sold the duplex to his business associate to whom he was not related for $312,000. How much, if any, was Bob’s recognized gain or loss with respect to these transactions?
Letter answer: _____
Explanation:
Part 2. What Code Section or Sections govern the result in part 1?
Letter Answer: ____
Explanation:
Part 3. Bob owned a duplex used as rental property. The duplex had an adjusted basis to Bob of $86,000 and a fair market value of $300,000. Bob transferred the duplex to his brother, Carl, in exchange for a triplex that Carl owned. The triplex had an adjusted basis to Carl of $279,000 and a fair market value of $300,000. Two months after the exchange, Carl sold the duplex to his business associate to whom he was not related for $312,000. How much, if any, gain or loss did Carl recognize with respect to the transaction with Bob?
Letter Answer: ____
Explanation:
Part 4. Bob owned a duplex used as rental property. The duplex had an adjusted basis to Bob of $86,000 and a fair market value of $300,000. Bob transferred the duplex to his brother, Carl, in exchange for a triplex that Carl owned. The triplex had an adjusted basis to Carl of $279,000 and a fair market value of $300,000. Two months after the exchange, Carl sold the duplex to his business associate to whom he was not related for $312,000. How much, if any, gain or loss did Carl recognize with respect to the sale by Carl two months after the transaction with Bob?
Letter Answer: ____
Explanation:
Part 5. Assume the same facts as in Part 4, except that Carl sold the duplex to the business associate more than two years after the exchange with Bob. Without taking into consideration any changes to the adjusted basis of the property subsequent to the exchange with Bob (such as for depreciation), how much, if any, gain or loss did Bob recognize with respect to the exchange with Carl?
Letter Answer: ____
Explanation:
Part 6. Under the facts of Part 5, what is Bob’s basis in the triplex?
Letter Answer: ____
Explanation:
Part 7. Assume the same facts as in part 6, except that Carl sold the duplex to his business associate more than two years after the exchange with Bob. Without taking into consideration any changes to the adjusted basis of the property subsequent to the exchange with Bob (such as for depreciation), how much, if any, is Carl’s recognized gain with respect to these transactions?
Letter Answer: ____
Explanation:
Essay Two
Part 1. Bobby and Bobbi were married in 2000 and in October 2015, they sold for $450,000 their principal residence that they had purchased in 2004 for $200,000. The property was owned by them as tenants by the entirety. They made major capital improvements during their 10-year ownership totaling ,000. What Code Section is applicable to the amount of gain recognized, and what, if any, is their recognized gain?
Letter Answer: ____
Explanation:
Part 2. Suppose instead that in the preceding problem (part 1) Bobby and Bobbi sold their home for $800,000. They moved into a smaller home costing $250,000. How much gain must they recognize?
Letter Answer: ____
Explanation:
Part 3. Assume instead that Bobby and Bobbi resided in a neighborhood where the values had gone way down, and the home purchased in 2004 for $200,000 (capital improvements of $40,000) was sold for only $110,000. How much loss is deductible on their 2015 Form 1040?
Letter Answer: ____
Explanation:
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