1. (TCOs 1 and 2) Due to the population change, the Goose Creek School District has decided to close one of its high schools. Because it had no further need of the property, the school was listed for sale. It received two bids. One was from the United Methodist Church for $1,700,000; the other was from Planet Motors for $1,600,000. The United Methodist Church would use the property to establish a sectarian middle school. Planet, a well-known car dealership, would revamp the property and operate it as a branch location
2. (TCOs 1, 2, 3, and 5.) Several years ago, Gordon purchased extra grazing land for his ranch at a cost of $80,000. In 2010, the land was condemned by the state for development as a highway maintenance depot. Under the condemnation award, Gordon received $200,000 for the land. Within the same year, he replaced the property with other grazing land. What is Gordon’s tax situation if the replacement land cost:
3. (TCOs 4 and 5) Edward operates an illegal drug-running business and has the following items of income and expense. What is Edward’s adjusted gross income from this operation?
Bribes to Police
Cost of Goods Sold
4. (TCOs 4 and 5) Maria, who is single, had the following items for 2011:
Loss on sale of § 1244 small business stock acquired 3 years ago
Stock acquired 2 years ago became worthless during the year
Long-term capital gain
Nonbusiness bad debt
Casualty gain on property held 4 years
5. (TCO 7) Norm purchases a new sports utility vehicle (SUV) on October 12, 2011, for $50,000. The SUV has a gross vehicle weight of 6,200 lbs. It is used 100% of the time for business and it is the only business asset acquired by Norm during 2011. Compute the maximum deduction with respect to the SUV for 2011. If Congress reenacts additional first-year depreciation for 2011, Norm elects not to take additional first-year depreciation.
6. (TCOs 6 and 7) Amanda uses a delivery van in her business. The adjusted basis is $21,000, and the fair market value is $18,000. The delivery van is stolen and Amanda receives insurance proceeds of $18,000. Determine Amanda’s realized and recognized gain or loss
7. (TCOs 3, 4, and 6) Trish had the following transactions during 2010:
Interest income on bonds
Issued by City of Newark $3,000
Issued by Chevron Corporation $2,000 $5,000
Alimony received $4,000
Child support received $12,000
City and state income taxes paid $5,000
Bank loan obtained to pay for vacation $8,000
What is Trish’s AGI for 2011?
8. (TCOs 3, 4, and 6) George is employed by the Quality Appliance Company. All the full-time employees are allowed to purchase appliances at the company’s cost plus 5%. The employee also is given, at no cost, a 1-year service contract on all the goods purchased from the company. George purchased a refrigerator for $420. The company’s normal selling price for the refrigerator is $800. George also received a service contract, at no charge, that had a value of $120. During the year, George was required to have his refrigerator serviced once. The cost of the call would have been $50 if he had not had the service contract. Is George required to recognize any income from the purchase of the refrigerator and the receipt of the service contract?