Using the following independent situations, answer the following questions: Situ

Question

Using the following independent situations, answer the following questions: Situation #1 Clara received from her Aunt Sona, property with a FMV at the date of the gift of $45,800. Aunt Sona purchased the property five years ago for $39,100. Clara sold the property for $47,500. Assume Aunt Sona does not have MAGI of over $200,000. a. What is the basis to Clara? b. What is Clara’s gain on the sale? c. If Clara is in the 33% tax bracket, what is the tax on the gain (assuming she has no other gains/losses to be netted)? d. If Clara is in the 15% tax bracket, what is the tax on the gain (assuming she has no other gains/losses to be netted)? Situation #2 Clara received from her Aunt Sona, property with a FMV at the date of the gift of $30,600. Aunt Sona purchased the property five years ago for $37,300. a. If Clara sold the property for $45,500, what is her gain or loss on the sale?

Explanation / Answer

Situation 1

a. What is the basis to Clara?

Ans. $39100

b. What is Clara’s gain on the sale?

Ans. $8400 ($47500 - $39100)

c. If Clara is in the 33% tax bracket, what is the tax on the gain?

Ans. Before 2013 : $1260 ($8400 x 15%)

After 2013 : $1680 ($8400 x 20%)

d. If Clara is in the 15% tax bracket, what is the tax on the gain?

Ans. Before 2013 : $0 (Nil tax)

After 2013 : $840 ($8400 x 10%)

Situation 2

Her Gain on sale of land = $8200 ($45500 - $37300)

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