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Piper purchased a parcel of land for $20,000 and constructed an apartment
building on it at a cost of $380,000 (total basis in land and building =
$400,000). He paid the entire purchase price and construction costs with
the proceeds of a nonrecourse loan that was secured by a mortgage on the
property. Two years later, when Peter’s basis in the land and apartment
building was $360,000 (due to $40,000 of depreciation on the building), the
fair market value of the land and building was $500,000 and the outstanding
balance on the mortgage was still $400,000, Peter sold the land and building,
subject to the mortgage, to Betty Boop for $100,000 in cash. As part of
the transaction, Betty assumed the mortgage.
gain or loss must Peter recognize? What is its character? What is Betty’s
basis in the property?
would be the tax consequences (gain/loss and character) to Peter if instead of
selling the land and apartment building, he gave it to his daughter, Paula
(subject to the mortgage)? What would be Paula’s basis in the property?
Individual A received $10,000 in cash from B. What is the federal income tax effect to A?
Clearly, this is an open ended question. Not expected to address all possible scenarios. What are important are the thought process
and the ability to support any points that are raised.
Please see sample on how to answer question attached. Thank you!