Question

In Year 1, Mr. Sonny made a gift to his brother, Carlton, of his interest in a small business corporation (Sec. 1244 stock) with adjusted basis of $120,000 and FMV of $140,000. Mr. Sonny paid no gift tax on the transfer. Carlton sold that interest for $60,000 in January Year 7. What are the amount and the character of Carlton’s loss?

Ordinary Loss

Capital Loss

• A.

$50,000

$30,000

• B.

$50,000

$10,000

• C.

$0

$60,000

• D.

$60,000

$0

In Year 1, Mr. P bought a residential lot for $8,000 and built a house on it at a cost of $52,000. He added an inground swimming pool costing $15,000 in Year 3. The house was destroyed by a federally declared disaster fire in Year 7, and he received a $45,000 insurance settlement. The fair market value of the property was determined to be $115,000 immediately before the fire and $25,000 immediately after. Mr. P’s adjusted gross income for Year 7 was $65,000. What is the amount of his nonbusiness casualty loss deduction?

• A.$15,400
• B.$23,400
• C.$8,500
• D.$38,400

Answer 1

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