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Basis of Emelio and Charitas Assets - Essay Example

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Summary
(i)Property received for Services performed, (ii)Bargain Purchase, (iii)Restricted Property, (iv)Taxable and Non-taxable Exchanges, (v)Involuntary Conversions, (vi)Partial business use of a property, (vii)Property transferred from a spouse, (viii)Gifted/inherited property, (ix)Community property, (x)Property held by surviving tenant, (xi)Property changed to business/rental use
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Basis of Emelio and Charitas Assets
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Download file to see previous pages Since the car is used for business use as well as personal use, its adjusted basis of $21,000 (19,500+1,500) is allocated to business purpose based on the extent of use for the same. Therefore the basis would be $14,280 [21000x6800/(6800+3200)].
The basis of the property received by Charita from her former spouse as part of divorce settlement would be same as former spouse's basis in it. Former spouse's basis in the property was lower of the following amounts:
Since the alternate valuation is elected and the stock is distributed to Charita within 6 months after her uncle's death, Charita's basis in the stock would be FMV of the stock on date of distribution, which is $14,500.
If alternate valuation was not elected by the executor, the basis would have been FMV on date of her uncle's death - $14,000. If alternate valuation was elected, but the date of distribution was not within 6 months of death, then the basis would be FMV on alternate valuation date - $13,300.
...
FMV of the property on the date of its conversion to rental property - $90,000
Adjusted basis on the date of conversion - $50,000
Therefore, the basis of the property is $50,000.
h. Desmond Inc Stocks Inherited
Since the alternate valuation is elected and the stock is distributed to Charita within 6 months after her uncle's death, Charita's basis in the stock would be FMV of the stock on date of distribution, which is $14,500.
If alternate valuation was not elected by the executor, the basis would have been FMV on date of her uncle's death - $14,000. If alternate valuation was elected, but the date of distribution was not within 6 months of death, then the basis would be FMV on alternate valuation date - $13,300.
i. Stock in Software Corporation
The basis of the original stock is $20,100 (price paid for the stock $20,000+brokerage $100). The basis of stocks after the split would be its FMV on date of split, which is $200,000 [(1000x2)x$100].
j. Shares gifted by Emelio's father
The basis of any shares received as gift would be as follows:
Gain basis - Adjusted basis of donor + Gift tax paid on appreciation = $3,500 (100x$35)
Loss basis - Lower of Gain basis and FMV on date of gift = $3,500 (Lower of $3,500 and $4,500)
If Gift tax was paid on the appreciation, the basis would have to be computed using the following formula:
Adjusted basis of the donor + [Gift tax X (FMV - Adjusted basis)/(FMV - ...Download file to see next pagesRead More
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