I need help with the following questions. Please note that these
questions are not current homework or exam questions. They are
questions from past exams that are available to all students in the
library. I need the answers to check to make sure the answers I came
up with are correct.

To the extent possible please answer citing specific Internal Revenue
Code and/or Regulation Sections. Case cites would also be helpful.
Beyond the basic answer to each question, I would also like to
understand WHY the question is worded the way it is. In other words,
what specific issues does the question raise, and are there any
underlying policy issues and/or conflicts.

I have a full set of class notes and a course outline that would
probably help in terms of formulating the type of answer I am looking
for - only problem is we are talking about 90+ pages of MS word docs
and Google won't let me post my e-mail. If the answers can be reached
without the notes/outline great - but if you can think of a way for me
to get that to you please let me know.

Also - and as if this assignment wasn't tough enough - I need the
answers by 3am on 12/14. I am spending the day doing the practice
exams and I will need to check them by 9am on 12/14 since my in class,
proctored exam is later that day.

In the Acme Packing Co. case, the taxpayer-corporation, located in El
Paso and in the
business of packaging dried fruits of all kinds, entered into a 2-year
employment agreement with Ralph, a
highly-rated executive with experience in the packaging field. Uneasy
about having to buy a new family
house in El Paso, Ralph insisted that Acme promise to buy back the new
house for an amount not less
than Ralph had paid for it if Ralph=s employment should not be renewed
at the end of the 2-year term.
Acme agreed. Sure enough, Acme dismissed Ralph at the end of the
2-year term and, as required, bought
Ralph=s house for $285,000, which was equal to Ralph=s purchase price.
Acme tried at once to resell the
house but found no one willing to pay more than $200,000 for it.
Finally, after peddling it around for
nearly eighteen months, Acme sold the house for only $185,000, taking
a $100,000 loss on the deal.
Acme never attempted to rent the house and never used it in its
packaging operations. Acme had
substantial net income from its ordinary business activities during
the year in question but no gains or
losses from the sale of property (other than the sale of Ralph=s former residence).
How should Acme treat the $100,000 loss for federal income tax
purposes? And: How should Ralph treat
the $285,000 that he received from Acme?

Question 2(A): Diggory makes a gift of stock to his daughter,
Eustacia. The stock cost Diggory
$20,000, but at the date of the gift it is worth only $15,000.
Eustacia later sells the stock for (a)
$22,000, (b) $13,000, or (c) $18,000. How much gain or loss does
Eustacia recognize under
each alternative?
Question 2(B): Suppose Eustacia received the stock (worth $15,000)
from her employer as a
year-end bonus. Assuming the same alternatives as above, how much gain
or loss would
Eustacia recognize on sale?


Question 3. Caspar (a pleasant fellow) collects coins as a hobby, and
has for many years. Last
year he paid $1,000 to a reputable coin dealer for a dime that bore
the mark AD@ for Denver
mintage, such dimes being very rare. Caspar subsequently observed that
the AD@ was slightly
raised from the surface of the coin, and for that reason he concluded
that the AD@ was counterfeit.
Caspar promptly confronted the dealer and demanded his money back, but
the dealer, insisting
that the coin was genuine, rejected Caspar=s demand. In the end, to
avoid controversy the dealer
settled with Caspar by repurchasing the dime from him for $400.
Last year, also, Caspar sold a rare half-dollar to another collector
for $800. The half-dollar,
which he had purchased some years earlier, cost Caspar $500.
Caspar asks you how he should treat these events on his federal income
tax return. Advise him.

Question 4. Proponents of the so-called Flat Tax B a tax on wages,
salaries and other personal
service income only B generally call for the elimination of the
present deduction for home
mortgage interest. Briefly explain (a) why eliminating the home
mortgage interest deduction is a
necessary, or at least a consistent, element of the Flat Tax plan, and
say also (b) who would be
helped (?) and who would be hurt (?) if the Flat Tax were adopted and
the home mortgage
interest deduction actually were eliminated.

Question 5. Osmond leased two acres of land from Isabel for the
purpose of storing heavy
equipment that Osmond uses in his business. The five-year lease
required Osmond to pay a
monthly rental of $500, or $6,000 a year. At the same time, Isabel
gave Osmond an option to
buy the property any time during the term of the lease. The price was
$100,000 in the first year,
but increased by $5,000 in each subsequent year (i.e., $105,000 in the
second year, $110,000 in
the third year, etc). If Osmond exercised the option, 33.3% of his
previously paid rent would be
credited against the purchase price.
Osmond exercises the buy-option at the end of the third year, paying
Isabel $104,000, i.e.,
$110,000 minus 3 x $2,000 = $104,000.
To what extent can Osmond deduct his $500 monthly rent payments in
years one through three?
And: What are the tax consequences to Osmond of exercising his buy-option?

Question 6. Miriam owns Greenacre, investment property, with a basis
of $100,000 and a value
of $60,000, but subject to a mortgage of $25,000. Baxter owns
Whiteacre, also investment
property, with a basis of $30,000 and a value of $80,000, but subject
to a mortgage of $5,000.
Miriam exchanges Greenacre for Whiteacre and pays Baxter $40,000 in cash. .
How much gain or loss, if any, does Miriam recognize on the exchange,
and what is her basis for
Whiteacre? How much gain or loss, if any, does Baxter recognize on the
exchange, and what is
his basis for Greenacre?