Exercise 13-26 (Algorithmic) (LO. 1)

Sally owns real property for which the annual property taxes are $15,930. She sells the property to Kate on April 2, 2022, for $796,500. Kate pays the real property taxes for the entire year on October 1, 2022.

Assume a 365-day year. Round any division to four decimal places. Round your final answers to the nearest dollar.

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a. How much of the property taxes can be deducted by Sally and how much by Kate?

Sally can deduct $fill in the blank 3fa38602406afdc_1 and Kate can deduct $fill in the blank 3fa38602406afdc_2 of the property taxes.

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The term sale or other disposition is defined broadly in the tax law and includes virtually any disposition of property. Realized gain or loss is the difference between the amount realized from the sale or other disposition of property and the property's adjusted basis on the date of disposition. The amount realized from a sale or other disposition of property is a measure of the economic value received for the property given up.

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b. What effect does the property tax apportionment have on Kate's adjusted basis in the property?

Kate's adjusted basis for the property is

decreasedincreasedincreased

by the $fill in the blank 64cf1700706b021_2 she paid that is apportioned to Sally.

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Partially correct

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c. What effect does the apportionment have on Sally's amount realized from the sale?

Sally paid none of the real property taxes and

isis notis

permitted to deduct the apportioned share of $fill in the blank ad5dcbf4002c072_2. Her amount realized is

decreasedincreasednot affectedincreased

by this amount.

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Partially correct

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d. How would the answers in parts (b) and (c) differ if Sally paid the taxes?

If Sally paid the taxes, Sally's amount realized would be $fill in the blank 63597ef9507d02e_1. Kate's adjusted basis would be $fill in the blank 63597ef9507d02e_2 .

These are still wrong