Mr. Nudnic completed the following transactions in 2019. (a) He gave his wife 100 common shares...
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Mr. Nudnic completed the following transactions in 2019. (a) He gave his wife 100 common shares of Underground Airways Ltd., a public company which had cost him $30 per share several years ago. At the time of the gift, the fair market value of the shares was $50 per share. The shares pay an annual dividend of $2 per share. His wife plans to reinvest the dividends in more shares of the company. If and when she sells the shares, she will reinvest the proceeds in shares of other corporations. (9 minutes) (b) In order to provide for his 13-year-old daughter's future education, he transferred a stone sculpture which had a fair market value of $50,000 to her. The lawyer who arranged to transfer title to the sculpture advised him to sell it to his daughter for $1 of her own money to effect a legal transfer. Mr. Nudnic had inherited the sculpture on the death of his mother when the fair market value of the sculpture was $20,000. In about five years, when his daughter begins university, she will sell the sculpture. (8 minutes) (e) He personally loaned $150,000 to his wife on a demand promissory note without interest, in order to help her purchase some land adjacent to her retailing business which she operated as a sole proprietorship. The land was used as a parking lot for the customers and employees of the business and was responsible for increasing the income of the business by about 5%. However, carly in 2019. the land was expropriated by the city for $200,000 and it was not replaced. The note was repaid from the proceeds of the sale of the land. (3 minutes) Required: Discuss all of the possible income tax implications of these transactions through to the ultinmate disposition by the recipient of the property involved, Mr. Nudnic completed the following transactions in 2019. (a) He gave his wife 100 common shares of Underground Airways Ltd., a public company which had cost him $30 per share several years ago. At the time of the gift, the fair market value of the shares was $50 per share. The shares pay an annual dividend of $2 per share. His wife plans to reinvest the dividends in more shares of the company. If and when she sells the shares, she will reinvest the proceeds in shares of other corporations. (9 minutes) (b) In order to provide for his 13-year-old daughter's future education, he transferred a stone sculpture which had a fair market value of $50,000 to her. The lawyer who arranged to transfer title to the sculpture advised him to sell it to his daughter for $1 of her own money to effect a legal transfer. Mr. Nudnic had inherited the sculpture on the death of his mother when the fair market value of the sculpture was $20,000. In about five years, when his daughter begins university, she will sell the sculpture. (8 minutes) (e) He personally loaned $150,000 to his wife on a demand promissory note without interest, in order to help her purchase some land adjacent to her retailing business which she operated as a sole proprietorship. The land was used as a parking lot for the customers and employees of the business and was responsible for increasing the income of the business by about 5%. However, carly in 2019. the land was expropriated by the city for $200,000 and it was not replaced. The note was repaid from the proceeds of the sale of the land. (3 minutes) Required: Discuss all of the possible income tax implications of these transactions through to the ultinmate disposition by the recipient of the property involved,
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Governmental and Nonprofit Accounting
ISBN: 978-0132751261
10th edition
Authors: Robert Freeman, Craig Shoulders, Gregory Allison, Robert Smi
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