Corporate tax : Basis rules
Project description
Week 5 Complete exercise: Basis Rules
Basis Rules
Basis is a key element in all aspects of accounting and tax calculations. Basis is the current value of an asset, so that when we dispose of the asset, we are able to understand the consequences. It could be a loss, it could be a gain, and even when that is determined, the tax rules may or may not allow for the deductibility of the loss or the inclusion of the gain.
Basis is a key element in all aspects of accounting and tax calculations. Basis is the current value of an asset, so that when we dispose of the asset, we are able to understand the consequences. It could be a loss, it could be a gain, and even when that is determined, the tax rules may or may not allow for the deductibility of the loss or the inclusion of the gain.
In June 2011, Karen transfers property with a $75,000 FMV and a $20,000 adjusted basis to Hal, her husband. Hal dies in March 2012; the property has appreciated to $85,000 in value by then. His gross estate is $1 million.
Based on this information, answer the following five questions:
What is the amount of Karen’s taxable gift in 2011?
What gain would Hal recognize if he sells the property for $95,000 in July 2011?
If Hal wills the property to Dot, his daughter, what basis would Dot have?
How would your answer to Part c change if Hal instead willed the property to Karen?
How would your answer to Part d change if Hal did not die until August 2012?
Submission Requirements:
Please submit the completed assessment to the Week 5 assessment area as a Word attachment.
Show step-by-step solutions to all calculations.
Font: Arial, 12 point
What is the amount of Karen’s taxable gift in 2011?
What gain would Hal recognize if he sells the property for $95,000 in July 2011?
If Hal wills the property to Dot, his daughter, what basis would Dot have?
How would your answer to Part c change if Hal instead willed the property to Karen?
How would your answer to Part d change if Hal did not die until August 2012?
Submission Requirements:
Please submit the completed assessment to the Week 5 assessment area as a Word attachment.
Show step-by-step solutions to all calculations.
Font: Arial, 12 point
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