Taxation

An individual taxpayer sells some used assets at a garage sale.Why are none of the proceeds taxable in most situations?

Laura receives a gift of real estate with an adjusted basis of $107,000 and a fair market value of $92,000. The donor paid gift tax of $19,000 on the transfer. If Laura later sells the property for $99,000, what is her recognized gain or loss?

Mariah had three property transactions during the year. She sold a vacation home used only for personal purposes at a $35,000 loss. The home had been held for five years and had never been rented. Mariah also sold an antique clock for $13,500 that she had inherited from her grandmother. The clock was valued in Mariah’s grandmother’s estate at $12,000. Mariah owned the clock for only four months. She sold these assets to finance her full-time occupation as a song writer. Near the end of the year, Mariah sold one of the songs she had written two years earlier. She received cash of $50,000 and a royalty interest in revenues derived from the merchandising of the song. Mariah had no tax basis for the song.

What is Mariah’s gross income?

Solution:

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