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15. LO.2 Wanda is considering selling two personal use assets that she owns. One has appreciated in value by $20,000, and the other has declined in value by $17,000. Wanda believes that she should sel
15. LO.2 Wanda is considering selling two personal use assets that she owns. One has appreciated in value by $20,000, and the other has declined in value by $17,000. Wanda believes that she should sell both assets in the same tax year so that the loss of $17,000 can offset the gain of $20,000.a. Advise Wanda regarding the tax consequences of her plan.b. Could Wanda achieve better tax results by selling the assets in different tax years?Explain.31. LO.1 Norm is negotiating the sale of a tract of his land to Pat. Use the following classification scheme to classify each of the items contained in the proposed sales contract:LegendDARN = Decreases amount realized by NormIARN = Increases amount realized by NormDABN = Decreases adjusted basis to NormIABN = Increases adjusted basis to NormDABP = Decreases adjusted basis to PatIABP = Increases adjusted basis to Pata. Norm is to receive cash of $50,000.b. Norm is to receive Pat’s note payable for $25,000, payable in three years.c. Pat assumes Norm’s mortgage of $5,000 on the land.d. Pat agrees to pay the realtor’s sales commission of $8,000.e. Pat agrees to pay the property taxes on the land for the entire year. If each party paid his or her respective share, Norm’s share would be $1,000 and Pat’s share would be $3,000.f. Pat pays legal fees of $500.g. Norm pays legal fees of $750.25. LO.4 Arnold, who is single, sold his principal residence on April 10, 2013, and excluded the realized gain under § 121 (exclusion on the sale of a principal residence).On April 12, 2013, he purchased another principal residence, which he sells on January 12,2014, for a realized gain of $80,000. Can Arnold exclude the $80,000 realized gain on theJanuary 2014 sale if his reason for selling was:a. His noisy neighbors? Explain.b. A job transfer to another city? Explain.41. Determine the realized, recognized, and postponed gain or loss and the new basis for each of the following likekind exchanges:Adjusted Basis Of Old Machine Boots Given Fair Market ValueOf New Asset Boot Received a. $7,000 $0 $12,000 $4,000b. 14,000 2,000 15,000 0c. 3,000 7,000 8,000 500d. 15,000 0 29,000 0e. 10,000 0 11,000 1,000f. 17,000 0 14,000 016. LO.5 After netting all of her shortterm and longterm capital gains and losses, Misty has a net shortterm capital loss and a net longterm capital loss. Can she net these against each other? Why or why not?18. LO.2, 5, 7 Near the end of 2013, Byron realizes that he has a net shortterm capital loss of $13,000 for the year. Byron has taxable income (not including the loss) of $123,000 and is single. He owns numerous stocks that could be sold for a longterm capital gain. What should he do before the end of 2013?22. LO.2, 4 Barbella purchased a wedding ring for $15 at a yard sale in May. She thought the ring was costume jewelry, but it turned out to be a real diamond ring. She is not in the business of buying and selling anything. She researched the ring on the Internet and discovered that it was worth at least $1,000. She sold it on an Internet auction site for $1,100 in July. Was the ring a capital asset? What were the amount and nature of the gain or loss from its sale by Barbella?
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** LO2 Wanda ** considering ******* *** ******** use assets **** *** owns *** has appreciated ** value by ****** *** the ***** has ******** ** value by $17000 ***** believes **** *** ****** **** both ****** ** *** **** tax **** so that *** **** ** ****** *** ****** the **** ** ******* ****** ***** ********* the *** ************ ** her ***** ***** ***** ******* better *** ******* ** selling *** assets ** ********* *** ************************ None ** *** ****** **** ** ********** ** ******* ********* ** **** ** ********** from ******** gross ****** ******* ****** gain will ** ******* income *** ***** ********** *** ***** ***** ** ****** *** result when **** ****** are **** ** * **** because ****** **** ****** *** taxable **** of ****** by ***** **** **** *** sold ********** Wanda **** not ****** *** **** ** ****** ** *** Norm ** *********** *** **** ** * ***** ** his **** ** *** *** the ********* ************** ****** to ******** **** ** the ***** ********* in the ******** ***** ******************* = Decreases ****** ******** ** ******** * ********* ****** realized by NormDABN = ********* ******** basis ** ******** * Increases ******** basis ** ******** * Decreases ******** basis to PatIABP * ********* ******** ***** ** **** Norm ** ** ******* **** ** ******* Norm ** to receive ******* note ******* for $25000 ******* ** three ****** *** assumes ******** ******** ** ***** on the landd Pat ****** to *** *** *********** ***** ********** of $8000e *** ****** to pay the ******** ***** ** *** land *** *** ****** **** If each party **** *** ** *** ********** share ******** ***** would ** ***** *** ******* ***** would ** $3000f *** **** ***** **** ** ***** **** **** legal **** ** ***************** IARN IABPb) **** ****** IARN ****** **** IABPe) **** by ***** **** ** ******* ****** ****** LO4 Arnold *** ** ****** **** his ********* residence on ***** 10 **** *** ******** the ******** **** ***** § *** ********** ** the **** ** * principal ************ ***** ** 2013 he purchased ******* ********* residence which ** ***** on ******* ****** *** a ******** **** ** $80000 *** Arnold ******* the ****** realized gain on ********** **** sale if *** ****** for ******* ***** *** noisy neighbors? Explainb * job transfer ** ******* ***** ******************** ********* *** ******** ********** *** postponed **** ** loss *** *** *** ***** for **** ** the ********* likekind exchanges:Adjusted ******* Old ******* Boots ***** **** ****** ******* *** ***** **** ********* ***** **** $12000 ****** ***** **** ***** **** **** **** **** **** ***** 0 ***** 0e ***** 0 ***** ***** ***** 0 14000 0 Solution:a) ******** gain * ***** ******** fair ****** value of new ***** * $4000 **** received) * ***** adjusted ***** ** old **************** gain * $4000Postponed **** * $9000 * $4000 * $5000New basis * ***** ******* fair ****** ***** ** *** ***** * $5000 ********* gain) b Realized loss * ********** is ** recognized ************* **** = $1000 * $0 * ******** ***** * $16000 ******* **** market ***** of *** ***** + ***** ********* loss) c ******** loss * $1500There is ** ********** ************* **** * ***** * $0 * ******** ***** = $9500 ****** fair ****** value ** new ***** * ***** ********* loss) d ******** **** * $10000There ** ** recognized ************* **** * ****** * ** * ********* ***** * ****** ($32000 **** market value ** *** *****  ****** postponed gain) e ******** **** * $2000Recognized gain * ************** **** * ******** ***** * ****** ******* **** ****** ***** of *** ***** * ***** ********* ******** ******** **** = $2000There ** ** ********** lossPostponed loss * $2000 * $0 = ******** basis * $10000 ****** **** ****** ***** ** *** asset + ***** postponed ******* *** ***** ******* all ** *** ********** *** ********* ******* ***** *** ****** Misty *** * *** shortterm capital **** *** a *** ********* ******* **** *** she *** ***** ******* **** ****** Why ** *** ****************** *** ***** six ******** possible **** netting capital ***** and ******* *** ******** both ***** **** *** **** **** **** ** loss ***** *** **** ********** *** longterm ******* **** *** ****** *** them ******* **** ***** ******* **** **** *** ******* *** * 7 **** the *** ** 2013 ***** realizes **** ** *** * *** ********** capital **** ** ****** for *** **** ***** *** taxable income **** ********* *** loss) of $123000 *** ** ****** He **** ******** ****** **** could ** **** *** * ********* ******* **** What ****** ** do before the *** ** ******************* ****** **** ****** ***** ** ******** ****** ********* ******* **** **** ******* his 2013 the *** ******* **** ** ***** *** $3000 *** AGI capital loss deduction 22 LO2 4 Barbella ********* * ******* ring *** *** ** * **** **** ** May She thought *** ring *** ******* ******* *** ** turned out ** ** * **** diamond ring *** is *** ** *** ******** ** ****** *** selling anything *** researched *** **** ** *** Internet and ********** **** ** was ***** ** least ***** *** **** ** ** ** ******** ******* **** *** ***** ** July *** *** ring * ******* ****** **** were *** ****** and nature of *** **** ** loss **** its sale ** Barbella?Solution:Barbella ********* *** **** *** ******** use ** asset *** **** she ***** **** ** *** ***** she ******* ** **** ** ** ** ********** Either *** the ***** *** ******* ***** ******* ****** *** ******** *** *** ********** *** capital assets She **** *** **** *** **** **** a **** Hence *** ***** term capital **** is ***** * *** * $1085 *** **** ** *** considered ** ********* ******* ******** *** *** ** *** ******** ** ******* *** ****** such ******