(Solved) On September 1, of the current year, Samuel, a cash-basis taxpayer, sells his farm to Edward, also a ...

On September 1, of the current year, Samuel, a cash-basis taxpayer, sells his farm to Edward, also a cash-basis taxpayer for $100,000. Samuel's basis in the farm is $65,000. The real property tax year is the calendar year. Real estate taxes on the property for the year are $3,650 and are payable on April 1 of the following year. The sales agreement does not provide for apportionment of real estate taxes between the buyer and seller. Assume Samuel pays all of the real estate taxes prior to the sale. The effects of this sales structure will be:
A) Taxes allocated to Samuel   Taxes allocated to Edward   Effect on Samuel's Gain
   $1,220   $2,430   increase gain by $1,220
B) Taxes allocated to Samuel   Taxes allocated to Edward   Effect on Samuel's Gain
   $2,430   $1,220   increase gain by $2,430
C) Taxes allocated to Samuel   Taxes allocated to Edward   Effect on Samuel's Gain
   $2,430   $1,220   decrease gain by $2,430
D) Taxes allocated to Samuel   Taxes allocated to Edward   Effect on Samuel's Gain
   $1,220   $2,430   decrease gain by $1,220

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On September 1, of the current year, Samuel, a cash-basis taxpayer, sells his farm to Edward, also a ...

Prentice Hall's Federal Taxation: 2011: Individuals

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