Question
In: Advanced Math
Taxpayer T owns an office building worth $950,000, encumbered by a mortgage of $710,000. His original...
Taxpayer T owns an office building worth $950,000, encumbered by a mortgage of $710,000. His original cost was $830,000, and he has taken depreciation deductions of $185,000 on the building.
T wants to exchange his building for another office building worth $800,000. He will assume the existing mortgage of $580,000 on the new building.
(This is a practice problem for an exam, please show work so I can understand the problem and how to get the correct answer.)
- As stated, would this be a fair arms-length exchange? If not, who should be required to pay cash boot, and how much? Explain.
- Assuming the exchange is made under the terms of your answer to #1, compute the following for T, showing all calculations:
a. Realized gain
b. Recognized gain
c. Basis in the new building
Solutions
Colby Messinger answered 2 years agoRelated Solutions
1: Ellis Company owns a small office building worth $300,000. Cameron is the risk manager. Ellis...
1: Ellis Company owns a small office building worth $300,000.
Cameron is the risk manager. Ellis faces the risk of fire which
would completely destroy their building. The probability of a fire
is known to be 3%.
Cameron is considering the following risk management options to
address the risk of fire to their building:
a. Retention
b. Full Insurance for a premium of $10,000
c. Safety Program & Retention
d. Safety Program & Full Insurance (premium falls to
$8,000)
The...
A firm owns a building worth 1,500,000. The premium for insurance on the building will cost...
A firm owns a building worth 1,500,000. The premium for
insurance on the building will cost $50,000.00. Expected annual
losses on the building is $30,000. The firm would earn 14% on funds
applied to operations. Invested reserves earn 4%. What is the true
cost of retaining the risk of loss on its building, including
opportunity costs. Explain your answer and show your work.
Chico Company paid $950,000 for a basket purchase that included office furniture, a building and land....
Chico Company paid $950,000 for a basket purchase that included
office furniture, a building and land. An appraiser provided the
following estimates of the market values of the assets if they had
been purchased separately: Office furniture $190,000; Building
$740,000, Land $132,000. Based on this information, the amount of
cost that would be allocated to the office furniture is closest to:
(Round your intermediate percentages to 2 decimal places: ie
0.054231 = 5.42%.):
a.Steve pays 5.27% interest on a mortgage of $710,000. His gross income is $134,000 p.a. plus...
a.Steve pays 5.27% interest on a mortgage of $710,000. His gross
income is $134,000 p.a. plus super of $8,000. His taxation and
Medicare liability totals $15,000 pa. Calculate Steve’s debt
service ratio (to the nearest percentage point).
If the answer is 25%, put 0.25 in the blank.
b.Chen has $119,000 of his own money to invest. He has a margin
loan available to add to this money to purchase Australian shares.
The bank’s loan-to-value ratio (LVR) is 86%. How much...
Central Purchasing Ltd. (CPL) owns the building it uses; it had an original cost of $8,192,000...
Central Purchasing Ltd. (CPL) owns the building it uses; it had
an original cost of $8,192,000 and accumulated depreciation of
$2,457,600 as of 1 January 20X2. On this date, the building (but
not the land) was sold to a real estate investment trust (REIT) for
$7,692,000, which also was the building’s fair value, and
simultaneously leased back to CPL.
The lease has a 15-year term and required payments on 31 December
of each year. The payments are $662,000 with no...
T/F 10. An exchange of an office building for a farm is not considered to be...
T/F
10. An exchange of an office building for a farm is not
considered to be a like-kind exchange.
11. If each party assumes a liability of the other party, only
the net liability given or received is treated as boot.
12. The holding period of the like-kind property given up
carries over to the holding period of the like-kind property
received.
Q2. XYZ company is considering building a new office building. XYZ already owns a plot of land...
Q2. XYZ company is considering building a new office
building. XYZ already owns a plot of land worth $2M and
has paid an architectural firm $300k for building
designs. Construction cost for the building is
$1M. Projected rent income from the building is
$400k/year and interest expense will be
$300k/year. After three years XYZ expects to sell the
building and land for $2.5M. If XYZ has a required rate
of return of 10%, what is the NPV and IRR of building the office
building?
Please...
Ralph owns a building that he is trying to lease. Ralph is a calendar-year, cash-method taxpayer...
Ralph owns a building that he is trying to lease. Ralph is a
calendar-year, cash-method taxpayer and is trying to evaluate the
tax consequences of three different lease arrangements. Under lease
1, the building rents for $700 per month, payable on the first of
the next month, and the tenant must make a $700 security deposit
that is refunded at the end of the lease. Under lease 2, the
building rents for $7,700 per year, payable at the time the...
Ralph owns a building that he is trying to lease. Ralph is a calendar-year, cash-method taxpayer...
Ralph owns a building that he is trying to lease. Ralph is a
calendar-year, cash-method taxpayer and is trying to evaluate the
tax consequences of three different lease arrangements. Under lease
1, the building rents for $680 per month, payable on the first of
the next month, and the tenant must make a $680 security deposit
that is refunded at the end of the lease. Under lease 2, the
building rents for $7,480 per year, payable at the time the...
Assume a $10,000,000 mortgage for an office building. The loan carries a rate of 4.25% based...
Assume a $10,000,000 mortgage for an office building. The loan
carries a rate of 4.25% based on monthly pay over a 30-year
amortization period. The loan has a balloon amount due in 10 years.
What is the balloon amount?
Group of answer choices
$7,844,018
$7,901,889
$7,675,923
$,7944,323
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