Taxation of Individual Income

Taxation of Individual Income Professor Kahn

Problem Set 21 – 3 Additional Problems

5. In Year Two, Robert sold Blackacre to his brother, John, for its fair market value of $30,000. Robert had a basis of $45,000 in Blackacre. In Year Three, John transferred Blackacre to Helen, an unrelated person, in exchange for Redacre and Blueacre. At the time of the exchange, Blackacre had a fair market value of $30,000, Redacre had a fair market value of $20,000, and Blueacre had a fair market value of $10,000. The exchange qualified for nonrecognition as a like kind exchange under section 1031. In Year Five, John sold Redacre to an unrelated person for its then fair market value of $60,000. What amount of gain did John recognize on that sale in Year Five?

6. Stephanie owned 400 shares of common stock of Tryon corporation, which is a publicly held corporation whose stock is sold on the stock exchange market. On March 12, Year Five, Stephanie instructed her broker to sell her 400 shares of Tryon stock, and the shares were sold on that date for their value of $40,000. Stephanie's basis in the 400 shares of Tryon stock was $100,000. On March 14, Year Five, Stephanie's adult daughter, Megan, purchased through her broker 300 shares of Tryon's common stock for its then value of $32,000. What was the tax consequence to Stephanie of the sale of her 400 shares of Tryon stock on March 12, Year Five? In Year Seven, Megan sold her 300 shares of Tryon stock to an unrelated person for $50,000. What was the tax consequence to Megan of that sale?

7. The same facts as those stated in Question 6 except that instead of Megan's having purchased 300 shares of Tryon's stock, it was Stephanie's husband, Randolph, who purchased 300 shares of Tryon's common stock on March 14, Year Five. What was the tax consequence to Stephanie of her sale of 400 shares of Tryon stock on March 12, Year Five? In Year Eight, Randolph sold his 300 shares of Tryon stock to an unrelated person for its then value of $25,000, what was the tax consequence to Randolph of that sale?