Tax Exam
Aneta Lesna
FINAL EXAM –ACCT 349
1. Samantha Corporation owns a building with a fair market value of $70,000 and an adjusted basis of $40,000. It exchanges the building for land with a fair market value of $45,000. Also assume that Samantha has a $10,000 mortgage on the building. As part of the exchange, the owner of the land agrees to assume the mortgage and pay the corporation $15,000 in cash. What are Samantha’s realized gain, recognized gain, and basis in the land?
Gain 5000
2. Susan is a 30% limited partner in the SJ Partnership in which capital is not a material income-producing factor. Partnership assets consist of land (basis 90,000), accounts receivable (basis $40,000) and cash of $200,000. SJ distributes$100,000 of the cash to Susan in liquidation of her interest. Susan’s basis in the partnership interest was $90,000 immediately before the distribution. The land is encumbered by a $20,000 mortgage that the partnership assumes. How much gain or loss does Susan recognize and what is its character?
Susan recognizes $25,000 of ordinary income and a $5,000 capital gain; the partnership cannot claim a deduction. Because Susan is a limited partner, SJ’s $25,000 payment for her share of unrealized receivables is treated as a § 736(b) payment. As such, Susan recognizes ordinary income, but the partnership cannot claim a deduction. The remaining $75,000 payment exceeds Susan’s $70,000 basis in the partnership interest by $5,000; therefore, Susan recognizes a $5,000 capital gain on disposition of the interest.
3. Beth and Tom are partners in Borts Security. Beth owns a 70% interest, and Tom owns the remaining 30%. Borts had the following transactions for the current year: Sales $345,000 103500 241500 Dividends received 20,000 6000 14000 Municipal bond interest 8,000 2400 5600 Short-term capital gain 3,000 900 2100 Long-term capital loss 12,000 3600
FINAL EXAM –ACCT 349
1. Samantha Corporation owns a building with a fair market value of $70,000 and an adjusted basis of $40,000. It exchanges the building for land with a fair market value of $45,000. Also assume that Samantha has a $10,000 mortgage on the building. As part of the exchange, the owner of the land agrees to assume the mortgage and pay the corporation $15,000 in cash. What are Samantha’s realized gain, recognized gain, and basis in the land?
Gain 5000
2. Susan is a 30% limited partner in the SJ Partnership in which capital is not a material income-producing factor. Partnership assets consist of land (basis 90,000), accounts receivable (basis $40,000) and cash of $200,000. SJ distributes$100,000 of the cash to Susan in liquidation of her interest. Susan’s basis in the partnership interest was $90,000 immediately before the distribution. The land is encumbered by a $20,000 mortgage that the partnership assumes. How much gain or loss does Susan recognize and what is its character?
Susan recognizes $25,000 of ordinary income and a $5,000 capital gain; the partnership cannot claim a deduction. Because Susan is a limited partner, SJ’s $25,000 payment for her share of unrealized receivables is treated as a § 736(b) payment. As such, Susan recognizes ordinary income, but the partnership cannot claim a deduction. The remaining $75,000 payment exceeds Susan’s $70,000 basis in the partnership interest by $5,000; therefore, Susan recognizes a $5,000 capital gain on disposition of the interest.
3. Beth and Tom are partners in Borts Security. Beth owns a 70% interest, and Tom owns the remaining 30%. Borts had the following transactions for the current year: Sales $345,000 103500 241500 Dividends received 20,000 6000 14000 Municipal bond interest 8,000 2400 5600 Short-term capital gain 3,000 900 2100 Long-term capital loss 12,000 3600