1. Faith inherited an undivided interest in a parcel of land from her father on
ID: 2371444 • Letter: 1
Question
1. Faith inherited an undivided interest in a parcel of land from her father on February 15, 2011. Her father had purchased the land on August 25,1965, and his basis for the land was $325,000. The fair market value of the land is $1,250,000 on the date of her father's death and is $1,100,000 six months later. The executor elects the alternate valuation date. Faith has nine brothers and sisters and each inherited a one-tenth interest. I) What is Faith's adjusted basis for her one-tenth undivided interest? II) What is her holding period for the land? (Points : 20) 2.Victor sold his personal residence to Colleen and paid real estate taxes of $9,450 for the year, $3,250 of which was apportioned to Colleen based on the period she owned the property during the year. What are the income tax consequences to each party? (Points : 10) 3. (TCOs 1, 2, 4, & 7) Caroline and Clint are married, have no dependents, and file a joint return in 2011. Use the following selected data to calculate their federal income tax liability. AMTI $325,000 Regular income tax liability $61,001 AMT tax preferences $107,000 4.Margaret is trying to decide whether or not to place funds in a qualified tuition program. Her son will be attending college in four years. She is in the 35% marginal tax bracket and she believes she can earn 7% before tax return on alternative investments. Thus, $10,000 will accumulate to $11,948 (after-tax) in four years. Margaret expects tuition to increase at the rate of 5% each year to $12,155 in four years. Her son will be in the 15% marginal tax bracket in all relevant years. Given these assumptions, should Margaret participate in the qualified tuition program? (Points : 15)Explanation / Answer
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