Brittany Callihan sold stock (basis of $184,000) to her son, Ridge, for $160,000, the fair market value.
a. What are the tax consequences to Brittany?
b. What are the tax consequences to Ridge if he later sells the stock for $190,000? For $152,000? For $174,000?
c. Write a letter to Brittany in which you inform her of the tax consequences if she sells the stock to Ridge for $160,000. Explain how a sales transaction could be structured that would produce better tax consequences for her. Brittany’s address is 32 Country
Lane, Lawrence, KS 66045.
http://retiredlecturers.com
57. LO.3 The Robin Corporation is owned as follows:
Isabelle 26%
Peter, Isabelle’s husband 19%
Sonya, Isabelle’s mother 15%
Reggie, Isabelle’s father 25%
Quinn, an unrelated party 15%
Robin is on the accrual basis, and Isabelle and Peter are on the cash basis. Isabelle and Peter each loaned the Robin Corporation $40,000 out of their separate funds. On
December 31, 2013, Robin accrued interest at 7% on both loans. The interest was paid on February 4, 2014. What is the tax treatment of this interest expense/income to Isabelle,
Peter, and Robin?
58. LO.3 For each of the following independent transactions, calculate the recognized gain or loss to the seller and the adjusted basis to the buyer.
a. Bonnie sells Parchment, Inc. stock (adjusted basis $17,000) to Phillip, her brother, for its fair market value of $12,000.
b. Amos sells land (adjusted basis $85,000) to his nephew, Boyd, for its fair market value of $70,000.
c. Susan sells a tax-exempt bond (adjusted basis $20,000) to her wholly owned corporation for its fair market value of $19,000.
d. Ron sells a business truck (adjusted basis $20,000) that he uses in his sole proprietorship to his cousin, Agnes, for its fair market value of $18,500.
e. Martha sells her partnership interest (adjusted basis $175,000) in Pearl Partnership to her adult daughter, Kim, for $220,000.
59. LO.3 Murphy has a brokerage account and buys on the margin, which resulted in an interest expense of $20,000 during the year. Income generated through the brokerage account was as follows:
Municipal interest $ 50,000
Taxable dividends and interest 350,000
How much investment interest can Murphy deduct?
60. LO.1, 3, 4 During the current year, Robert pays the following amounts associated with his own residence and that of his daughter, Anne:
Property taxes:
On home owned by Robert $3,000
On home owned by Anne 1,500
Mortgage interest:
Associated with Robert’s home 8,000
Associated with Anne’s home 4,500
Repairs to:
Robert’s home 1,200
Anne’s home 700
Utilities:
Robert’s home 2,700
Anne’s home 1,600
Replacement of roof:
Robert’s home 4,000
a. Which of these expenses can Robert deduct?
b. Which of these expenses can Anne deduct?
c. Are the deductions for AGI or from AGI (itemized)?
d. How could the tax consequences be improved?
