Irene Andrews is purchasing the assets of a sole proprietorship from Seth. The COMMUNICATIONS fair market values of the assets as agreed to by Irene and Seth are as follows: The purchase price is $950,000.
a. Calculate Seth’s realized and recognized gain.
b. Determine Irene’s basis for each of the assets.
c. Write a letter to Irene informing her of the tax consequences of the purchase. Her address is 300 Riverside Drive, Cincinnati, OH 45207.
Melanie owns a personal-use boat that has a fair market value of $32,500 and an adjusted basis of $45,000. Melanie’s AGI is $90,000.
Calculate the realized and recognized loss if:
a. Melanie sells the boat for $32,500.
b. Melanie exchanges the boat for another boat worth $32,500.
c. The boat is stolen and Melanie receives insurance proceeds of $32,500.
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