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mrs_skeptik [129]
3 years ago
8

Melvin receives stock as a gift from his uncle. No gift tax is paid. The adjusted basis of the stock is $19,000 and the fair mar

ket value is $25,000. Melvin trades the stock for bonds with a fair market value of $22,000 and $3,000 cash. What is his recognized gain and the basis for the bonds?
Business
2 answers:
Karolina [17]3 years ago
4 0

Answer:

Recognized gain = $6000

Basis of the bond = $22,000

Explanation:

Given the following ;

Adjusted basis of stock = $19,000

After trading the stock for bond;

Market value of bond = $22,000

Cash received = $3000

Recognized gain = valuation after trading stock for bond - Adjusted basis of stock

Therefore,

Recognized gain = ($22,000+$3000) - $19,000 = $6000

Basis of a bond is simply the market value or quoted price of the bond.

Here, the market value of the bond received by trading his stock is $22,000

Therefore, the basis of the bond is $22,000

NARA [144]3 years ago
3 0

Answer:

a gain for 6,000 dollar will be recognized

the new bonds basis will be of 22,000

Explanation:

Total proceeds from the sale:

22,000 in bonds plus 3,000 cash for a total of 25,000

The basis of the bond gifted was 19,000

Therefore, there is a realzied gain on sale for the difference which is 6,000 dollars.

The new bonds are worth 22,000 therefore their basis will be of 2,,000 dollars

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Answer:

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Variable Cost               (63,000)

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