1) On March 1 of the previous year, a parent sold stock with a cost of $9,000 to
ID: 2417911 • Letter: 1
Question
1) On March 1 of the previous year, a parent sold stock with a cost of $9,000 to her child, for $6,000, its fair market value. On September 30 of the current year, the child sold the same stock for $7,500 to Jones, who is unrelated to the parent and child. What is the proper treatment for these transactions?
a. Parent has a $3,000 recognized loss and child has $1,500 recognized gain.
b. Parent has $3,000 recognized loss and child has $0 recognized gain.
c. Parent has $0 recognized loss and child has $0 recognized gain.
d. Parent has $0 recognized loss and child has $1,500 recognized gain.
2)
A taxpayer sold for $250,000 equipment that had an adjusted basis of $220,000. Through the date of the sale, the taxpayer had deducted $40,000 of depreciation. Of this amount, $27,000 was in excess of straight-line depreciation. What amount of gain would be recaptured under Section 1245 (Gain from Dispositions of Certain Depreciable Property)?
a. $40,000
b. $27,000
c. $13,000
d. $30,000
3)
Regina, a calendar-year taxpayer, purchased used furniture and fixtures for use in her business and placed the property in service on September 1, 2015. The furniture and fixtures cost $46,000 and represented Regina’s only acquisition of depreciable property during the year. Regina did not elect to expense any part of the cost of the property under Sec. 179. What is the amount of Regina’s depreciation deduction for the furniture and fixtures under the Modified Accelerated Cost Recovery System (MACRS) for 2015?
a. $ 2,667
b. $ 6,573
c. $ 8,000
d. $16,000
Explanation / Answer
Since, parent and child are related. Loss to parent will not be allowed. Hence, recognized losses will be $0.
Since, child sold to unrelated buyer for $1,500 profit. This profit will be recognized as recognized profit.
Hence, correct option is (D).
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