109. Judith (now 37 years old) owns a collection of porcelain dolls that she acquired when she was a grade schooler. She had forgotten about them until her mother sent them to her. Her mother had...

109.

Judith (now 37 years old) owns a collection of porcelain

dolls that she acquired when she was a grade schooler. She had forgotten about them until her

mother sent them to her. Her mother had discovered them in a box in her attic

while she was cleaning out her house before selling it. Judith had originally

acquired all the dolls as gifts from her parents, so she has no way to

establish a basis for the dolls. Using information from the Internet, she

prepares a careful inventory of the dolls that includes their name, when they

were first available for sale, their current value, and other pertinent

information. She then lists them for sale on the Internet. To her surprise, she

quickly gets an offer of $5,000 for all of them and sells them. Judith has no

other gain or loss transactions for the year and is in the 28% marginal tax

bracket. What issues do these facts create?

110.

Hilda lent $2,000 to a close personal friend to help the

friend avoid overdrawing the friend’s checking account. The friend was supposed

to repay the $2,000 within a month. Instead, the friend declared personal

bankruptcy and Hilda will never recover any of the $2,000. What are the tax

implications of these events for Hilda?

111.

Ranja acquires $200,000 face value corporate bonds for

$186,000 when the bonds are issued. He holds the bonds as an investment for two

years and then sells them for $198,000. He amortizes $2,000 of the OID. What

tax issues does Ranja have with respect to these bonds?

112.

In early 2013, Wanda paid $33,000 for an option on a parcel

of land she intended to hold as an investment. After a survey of the land (paid

for by the grantor) determined that the parcel was much smaller than the grantor

said it was, she let the option lapse when it expired in 2014 after 14 months.

How should Wanda treat these events in 2013? 2014?

113.

Jambo invented a new flexible cover for a popular brand of

cellphone, but did not have the finances to begin production of the cover.

Instead, he sold all his rights to the invention (after patenting it) for

$450,000 plus $.10 for each cover sold by the company that purchased the

patent. Jambo had a zero tax basis for the invention. What is the character of

his gain from disposition of the patent?

114.

“Collectibles” held long­term and sold at a gain are subject

to maximum tax rate of 28%. An individual taxpayer recently sold an antique car

for $40,000. The car had been held for several years and $30,000 was originally

paid for it. Explain why the car is or is not a collectible.

115.

When an individual taxpayer has a net long-term capital gain

that includes both 28% gain and 0%/15%/20% gain, which of these gains will be

taxed first when the alternative tax on net long-term capital gain method is

used and what difference does it make?

116.

Why is it generally better to have a net § 1231 gain year

followed by a net § 1231 loss year rather than a net

§ 1231 loss year followed by a net § 1231 gain year?

117.Describe the

circumstances in which the potential § 1245 depreciation recapture is

extinguished.

118.

Describe the circumstances in which the maximumunrecaptured § 1250 gain (25% gain) does notbecome part of the Schedule D

netting process for an individual taxpayer?