Addendum to Problem #2-2013 Text “Grove Case”



to Problem #2-2013 Text


Grove’s had the following property transactions in 2011-they must
be incorporated into the solution for the case study.

1. On 11/22, the Grove’s sold
a gun collection for $32,500. The gun collection was gifted to Robert by his
father on 12/25/07 when it had a fair market value of $22,000. His father’s
cost basis was $14,000 when it was acquired in 1997.

2. On 11/9/11, the Grove’s
sold 3,000 shares of Smith Pharmaceuticals for $5,000. The stock was purchased
by them on 12/4/09 for $25,000. The investment was motivated by a rumor that a
specialty drug was about to receive FDA approval. When the approval was not
received, the Wheat’s decided to cut their losses.

3. On 7/24/11, the Grove’s
sold shares in POTUS, Inc. for $15,000. The stock was purchased from a family
friend Barry Romney for $25,000 on 8/8/09. It was Section 1244 when Barry
purchased the stock in 2007.

4. In 2012, the
Grove’s principal residence was damaged by fire. They were insured for 90% of
the actual loss and they received the insurance settlement. Pertinent data with
respect to the property is as follows:

Cost basis


Value before casualty


Value after casualty


Robert received a gift of income-producing property with an
adjusted basis on 5/17/80 of $75,000 to the donor and fair market value of
$69,000 on the date of gift-4/23/95. Gift tax of $7,000 was paid by the donor.
He subsequently sold the property on 8/8/11 for $72,000.

If there is a fact or facts from the case study (either from the
textbook or this addendum) that it is not reflected in your deliverable- a well
written and understandable statement MUST
be attached to your solution explaining the reasons for the exclusion. In many
cases this could be a calculation AND
an explanation This is a requirement of the case study and failure to comply
will result in a grade reduction.


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