On September 1,of the Current Year,Samuel,a Cash-Basis Taxpayer,sells His Cottage

question 53

Multiple Choice

On September 1,of the current year,Samuel,a cash-basis taxpayer,sells his cottage to Edward,also a cash-basis taxpayer for $100,000.Samuel's basis in the cottage is $65,000.The real property tax year is the calendar year.Real estate taxes on the property for the year are $3,650 and are payable on April 1 of the following year.The sales agreement does not provide for apportionment of real estate taxes between the buyer and seller.Assume Samuel pays all of the real estate taxes prior to the sale.The effects of this sales structure will be

• A) \[\begin{array} {| l | l | l | }
• \hline \begin{array} { l }
• \text { Saxes allocated to } \\
• \text { Samuel }
• \end{array} & \begin{array} { l }
• \text { Taxes allocated to } \\
• \text { Edward }
• \end{array} & \text { Effect on Samuel's Gain } \\
• \hline \$ 1,220 & \$ 2,430 & \text { increase gain by } \$ 1,220 \\
• \hline
• \end{array}\]
• B) \[\begin{array} { |l | l | l | }
• \hline \begin{array} { l }
• \text { Taxes allocated to } \\
• \text { Samuel }
• \end{array} & \begin{array} { l }
• \text { Taxes allocated to } \\
• \text { Edward }
• \end{array} & \text { Effect on Samuel's Gain } \\
• \hline \$ 2,430 & \$ 1,220 & \text { increase gain by } \$ 2,430 \\
• \hline
• \end{array}\]
• C) \[\begin{array} { |l | l | l | }
• \hline \begin{array} { l }
• \text { Taxes allocated to } \\
• \text { Samuel }
• \end{array} & \begin{array} { l }
• \text { Taxes allocated to } \\
• \text { Edward }
• \end{array} & \text { Effect on Samuel's Gain }\\
• \hline \$ 2,430 & \$ 1,220 &\text { decrease gain by } \$ 1,220 \\
• \hline
• \end{array}\]
• D) \[\begin{array} { |l | l | l | }
• \hline \begin{array} { l }
• \text { Taxes allocated to } \\
• \text { Samuel }
• \end{array} & \begin{array} { l }
• \text { Taxes allocated to } \\
• \text { Edward }
• \end{array} & \text { Effect on Samuel's Gain }\\
• \hline \$ 1,220 & \$ 2,430 &\text { decrease gain by } \$ 1,220 \\
• \hline
• \end{array}\]

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