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ACCT 323
HOMEWORK #5
FEBRUARY 2016
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)

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