Lucky is at a professional baseball game and catches a homer…

Lucky is at a professional baseball game and catches a homerun baseball that is worth $50,000.  The ball was hit by a star player, and it broke the record for the longest homerun ball in the baseball club’s history. Lucky keeps the ball, puts it on his shelf, and shows it to all his friends.  In the next year, Lucky’s accountant tells him he has to pay tax on the ball. Unfortunately for Lucky, in YEAR 2, another player broke the existing record, and the ball is now only worth $25,000. Lucky sells the ball in YEAR 2 for $25,000.  Which one of the following is correct?

In 2014, Ruth purchased an office building for $1,500,000, p…

In 2014, Ruth purchased an office building for $1,500,000, paying $100,000 cash and borrowing $1,400,000 recourse from a bank.  According to the terms on the loan, Ruth paid interest only for the first 10 years whereupon the principal would come due.  When 10 years finally came, Ruth could not make the principal payment of $1,400,000.  Ruth had properly depreciated the building by $300,000 over the last 10 years.  Ruth had assets of $600,000 (when that was gone, she was insolvent) at the time the payment was due, and Ruth could not to make the $1,400,000 payment.  The bank took back the property in full satisfaction of Ruth’s obligations when the property had a FMV of $800,000.  Which one of the following is correct?

Anika is a world-famous singer and songwriter.  Her studio a…

Anika is a world-famous singer and songwriter.  Her studio attracts investors from around the world.  Anika is decorating the welcome area of her office suite and decides to purchase the first copy of the Album “My Happiness” by Elvis Presley.  Anika purchases the album for $200,000 and places it in her welcome area.  Anika has a wonderful career, and 20 years after buying the rare album, Anika retires.  Anika sells the album for $300,000.  Assume the tax rate on capital gains is 15%, and Anika’s marginal rate is 25%.  Which of the following is correct?