True/False: ____ The basis of property acquired from a decedent is the adjusted

Question

True/False:

____    The basis of property acquired from a decedent is the adjusted basis of the property held by the decedent at the time of death.

____ The basis of property acquired by gift is the donors adjusted basis of the property.

_____   If the taxpayer chooses not to claim depreciation for tax purposes for three years and subsequently sells or otherwise disposes of the property, his adjusted basis is his initial cost basis without any reduction for depreciation.

_____ In Commissioner v. Tufts, 461 U.S. 300, 103 S.Ct 1826, the Supreme Court concluded that when the amount of the non-recourse note assumed by the buyer exceeds the property’s fair market value, the seller excludes the excess from the amount realized on the sale.

_____ Prior to their marriage Jack sold Diane 50% interest in his rental property. Jack is not required to recognize gain/loss on the sale since the sale was in contemplation of marriage.

_____ Under a divorce decree the ex-spouse must relinquish ownership in an asset to the husband three years after the divorce is final. The husband will assume the basis of the property from the ex-spouse.

_____ A loss on the sale of a personal residence is not deductible.

_____ When the buyer assumes the seller’s liability on a mortgage, the seller includes the amount of the mortgage in computing the amount realized from the sale.

____    Trade Accounts Receivable are capital assets.

_____ A corporation may carry forward capital losses to offset against capital gains indefinitely

_____To qualify as Section 1231 property, it must be used in the trade or business and must be held for more than one year.

_____ Under IRC Section 165(g) if any security which is a capital asset becomes worthless during the taxable year, the loss shall be treated as a loss from the sale or exchange of a capital asset on the last day of the taxable year.

_____ Business property held for less than or equal to one year always produces ordinary income or loss.

_____ The basis of business property is reduced by the greater of the depreciation allowed or allowable.

____    Janice buys property by paying $1,000 down and borrowing $9,000. Janice’s initial basis in the property is $1,000.

Explanation / Answer

1 True , the adjusted basis will be the fair value minus any liability.

2 True , the transferred basis will be considered as adjusted basis

3. false , the adjusted basis will be fair market value minus depreciation

13. true , assets under section 1231 , is sold within one year is a part of ordinary income

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