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Cch Comprehensive Topics Chapter 10

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Chapter 10: Questions #1-20 1. Distinguish between realized gains and losses and recognized gains and losses. Realized gain or loss is the difference between the amount realized from the sale or other disposition of property and the adjusted basis at the time of sale or disposition. The amount realized is the sum of money received plus the fair market value of other property received. If a realized gain or loss is recognized the gain is includible and the loss is deductible in determining taxable income. Thus, “recognition” means that the result of a particular transaction is considered to be taxable income or a deductible loss. Generally, recognition occurs at the time of sale or exchange. Therefore, realized gain or loss is the …show more content…

If value is 15% or more, basis must be allocated to the rights but only if rights are exercised or sold. The holding period runs from the date the original stock was acquired. 10. What’s the basis and holding period of taxable stock rights and the basis and holding period of the shares of stock if the rights are exercised? Amount of income and the basis of the rights constitute the FMV of the rights at the date of distribution, which is the date the holding period of the rights begin. If rights are exercised, basis of new shares = subscription price + basis of rights and holding period of new shares begins on date of exercise. Basis and holding period of old stock remain the same. 11. What’s the basis of gift property? A taxpayer’s original basis for gift property is the same as the property’s adjusted basis in the hands of the donor or the last preceding owner by whom it was not acquired by gift. However, if the property’s FMV at time of gift is less than adjusted basis to the donor, then basis for determining loss is the FMV at the time of the gift. CODE SECTION 1015 12. What adjustment, if any, must be made to the basis of property acquired by gift if gift was made prior to 1977? After 1976? For gifts made after 1976, basis is increased by the portion of gift that attributable to the net appreciation value of the gift. For gifts made before 1977, the full amount of gift tax is added to donor’s adjusted

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