Walter Sells Land with an Adjusted Basis of $175,000 and a Fair

question 30

Essay

Walter sells land with an adjusted basis of $175,000 and a fair market value of $160,000 to his mother, Shirley, for
$160,000. Walter reinvests the proceeds in the stock market. Shirley holds the land for one year and a day and sells it in the marketplace for $169,000.
a. Determine the tax consequences to Walter.
b. Determine the tax consequences to Shirley.

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Definitions:

Equitable Remedies

Judicial remedies requiring a party to act or refrain from acting in a certain way, often used when monetary compensation is insufficient.

Specific Performance

A legal remedy where a court orders a party to fulfill their obligations under a contract, rather than just paying damages.

Market Value

The current price at which an asset or service can be bought or sold in a marketplace.

Resell

The act of selling an item or property that one has previously bought, often to realize a profit or recover an investment.