For Each of the Following Situations,identify the Property's Adjusted Basis

question 40

Essay

For each of the following situations,identify the property's adjusted basis and briefly explain how you determined the adjusted basis amount.
a.Mei-ling purchased 150 shares of MAPCO stock for $5,400 in 2004. On February 28, 2016, Mei-ling purchased another lot of 150 shares of identical stock for $3,750. Mei-ling sells the original 150 shares of MAPCO stock for $3,300 on March 15, 2016. What is Mei-ling's basis in the 150 shares she purchased February 28, 2016?
b.Ralph gives Linda 500 shares of Money Maker common stock. The stock cost Ralph $30,000 several years earlier. The stock is worth $50,000 on the date it is given to Linda, and Ralph pays $1,500 of gift tax on the transfer. What is Linda's basis in the stock if she sells it for $20,000?
c.Assume the same facts as in part b, except that the fair market value of the stock on the date of the gift is $25,000.
d.Leon receives a van as a gift from his father. His father's basis in the van is $30,000. The fair market value at the date of the gift is $20,000. A gift tax of $2,000 is paid on the gift. Geroge uses the van in his pizza delivery service for three years, at which time he sells it for $8,000. During the three years he used the van in his business, Geroge deducts $10,000 in depreciation on the van.
e.Bonita owns a house that she used as a residence until this year. She paid $150,000 for the house on November 4, 2002. On April 4, 2016, Bonita purchases a new residence and converts the former residence into office space to use in her real estate business. The former residence is worth $180,000 on April 4, 2016.

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Definitions:

Income Statement Debit Column

Typically, an income statement does not use a debit column; instead, expenses decrease revenue to show net income or loss.

Balance Sheet Credit Column

Part of the balance sheet that records liabilities, equity, and certain revenues that increase the company's worth or decrease its debts.

Worksheet

An informal business document used internally for planning and preparatory purposes, assisting in the preparation of financial statements or other reports.

Worksheet

A document or tool used by accountants to record and organize financial data, facilitating the preparation of financial statements.