FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 15: Property Transactions: Nontaxable Exchanges

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 71

Essay

Review LaterAdd Note

Review Later

Beth sells investment land (adjusted basis of $225,000)that she has owned for 6 years to her husband,Richard,for its fair market value of $195,000.

Correct Answer

verified

Show Answer

Question 72

Multiple Choice

Review LaterAdd Note

Review Later

Ross lives in a house he received as a gift from his father.His father had lived in the house for 12 years.The adjusted basis of the house to his father was $160,000 and the fair market value at the time of the gift was $140,000.Ross sells this residence after living in it for 18 months for $150,000 and purchases a new home for $125,000.He incurs selling expenses of $7,000.What is Ross' recognized gain or loss and basis for the new residence?

A) ($17,000) ; $125,000.
B) ($17,000) ; $142,000.
C) $3,000; $125,000.
D) $3,000; $128,000.
E) None of the above.

F) B) and E)
G) D) and E)

Correct Answer

verified

Show Answer

Question 73

Essay

Review LaterAdd Note

Discuss the relationship between realized gain and boot received in a § 1031 like-kind exchange.

Mandy and Greta form Tan,Inc.,by transferring the following assets to the corporation in exchange for 5,000 shares of stock each.

Define an involuntary conversion.

An office building with an adjusted basis of $320,000 was destroyed by fire on December 30,2012.On January 11,2013,the insurance company paid the owner $450,000.The fair market value of the building was $500,000,but under the co-insurance clause,the insurance company is responsible for only 90 percent of the loss.The owner reinvested $410,000 in a new office building on February 12,2013,that was smaller than the original office building.What is the recognized gain and the basis of the new building if § 1033 (nonrecognition of gain from an involuntary conversion) is elected?

The amount realized does not include any amount received by the taxpayer that is designated as severance damages by both the government and the taxpayer.

Don,who is single,sells his personal residence on October 5,2012,for $380,000.His adjusted basis was $102,000.He pays realtor's commissions of $18,000.He owned and occupied the residence for 14 years.Having decided that he no longer wants the burdens of home ownership,he invests the sales proceeds in a mutual fund and enters into a 1-year lease on an apartment.The detriments of renting,including a crying child next door,cause Don to rethink his decision.Therefore,he purchases another residence on November 6,2013,for $188,000.Is Don eligible for exclusion of gain treatment under § 121 (exclusion of gain on sale of principal residence)? Calculate Don's recognized gain and his basis for the new residence.

An involuntary conversion results from the destruction (complete or partial),theft,seizure,requisition or condemnation,or the sale or exchange under threat or imminence of requisition or condemnation of the taxpayer's property.

Samuel's hotel is condemned by the City Housing Authority on July 5,2012,for which he is paid condemnation proceeds of $950,000.He first received official notification of the pending condemnation on May 2,2012.Samuel's adjusted basis for the hotel is $600,000 and he uses a fiscal year for tax purposes with a September 30 tax year-end.

To be eligible to elect postponement of gain treatment for an involuntary conversion,what are the three tests for qualifying replacement property?

Eunice Jean exchanges land held for investment located in Rolla,Missouri,for land to be held for investment located near Madrid,Spain.Her basis for the land given up is $370,000 and the fair market value of the land received is $390,000.Eunice Jean also receives cash of $25,000.

The basis of boot received in a like-kind exchange is its fair market value,unless the realized gain is a smaller amount.

Fran was transferred from Phoenix to Atlanta.She sold her Phoenix residence (adjusted basis of $250,000) for a realized loss of $50,000 and purchased a new residence in Atlanta for $375,000.Fran had owned and lived in the Phoenix residence for 6 years.What is Fran's recognized gain or loss on the sale of the Phoenix residence and her basis for the residence in Atlanta?

Paula inherits a home on July 1,2012,that had a basis in the hands of the decedent at death of $290,000 and a fair market value of $500,000 at the date of the decedent's death.She decides to sell her old principal residence,which she has owned and occupied for 9 years,with an adjusted basis of $125,000 and move into the inherited home.On September 16,2012,she sells the old residence for $600,000.Paula incurs selling expenses of $30,000 and legal fees of $2,000.She decides to add a pool,deck,pool house,and recreation room to the inherited home at a cost of $100,000.These additions are completed and paid for on November 1,2012.What is her recognized gain on the sale of her old principal residence and her basis in the inherited home?

Patty's factory building,which has an adjusted basis of $325,000,is destroyed by fire on March 5,2012.Insurance proceeds of $475,000 are received on May 1,2012.She has a new factory building constructed for $450,000,which she occupies on October 1,2012.Assuming Patty's objective is to minimize the tax liability,calculate her recognized gain or loss and the basis of the new factory building.

Which of the following statements is incorrect for a § 1033 involuntary conversion?

Latisha owns a warehouse with an adjusted basis of $112,000.She exchanges it for a strip mall building worth $150,000.Which of the following statements is correct?

In a nontaxable exchange,the replacement property is assigned a carryover basis.