Exam 12: Property Transactions: Nontaxable Exchanges

On May 1 of this year,Ingrid sold her personal residence for $250,000.Commissions on the sale were $20,000.Ingrid also incurred $10,000 of costs for painting and repairs,which were all completed and paid for two weeks prior to the sale of her home.Ingrid's basis in her old home was $180,000.Ingrid's realized gain upon the sale of her first home is

Emily owns land for investment purposes that has a FMV of $300,000 (basis of $260,000).She exchanges the land,plus $40,000 cash,for a warehouse to be used in her business.The warehouse is worth $420,000,but is subject to a mortgage of $80,000 which Emily will assume.The gain realized by Emily on the exchange is

Amber receives a residence ($750,000 FMV,$500,000 adjusted basis)owned for eight years by Jonathan,her former spouse,as part of a divorce settlement.Amber and Jonathan had lived in the home for the four years before the divorce.Seven months after the transfer of the residence,Amber sells it for $790,000.What is the amount of Amber's recognized gain on the sale of the home?

Kevin exchanges an office building used in his business for another office building worth $200,000 plus $30,000 cash.The FMV of Kevin's old building is $280,000 (basis $150,000)and it is subject to a mortgage of $50,000.The mortgage is assumed by the other party. a.What is the amount of gain realized by Kevin? b.What is the amount of gain recognized by Kevin? c.What is the basis of the new building to Kevin?

All or part of gain realized on an involuntary conversion is deferred but not permanently excluded if qualifying replacement property is acquired within the requisite period of time.

An investor in artwork holds a Picasso painting which has appreciated substantially since she purchased it.The art investor exchanges the Picasso for a Van Gogh painting of similar value.The transaction qualifies as a like-kind exchange and the gain will not be recognized.

Luke's offshore drilling rig with a $700,000 adjusted basis is destroyed by a hurricane.He collects $620,000 from the insurance company and purchases a new drilling rig for $600,000. a.What are the tax consequences of these transactions? b.What is the basis of the new rig?

All of the following statements are true with regard to personal residences except:

Discuss why a taxpayer would want to avoid like-kind exchange provisions.

Gena exchanges land held as an investment with a $60,000 basis for other land with a $80,000 FMV and a motorcycle with a $10,000 FMV.The acquired land is to be held for investment and the motorcycle is for personal use.What is the amount of recognized gain?

Generally,a full exclusion of gain under Sec.121 upon the sale of a personal residence applies to only one sale or exchange every

Cheryl owns 200 shares of Cornerstone Corporation common stock which has an adjusted basis of $60,000 and a fair market value of $75,000.John owns 200 shares of Cable Corporation with a $75,000 fair market value. a.If Cheryl and John exchange their stock,what is the amount of Cheryl's realized gain? b.If Cheryl and John exchange their stock,what is the amount of Cheryl's recognized gain?

Discuss the rules regarding the holding period for like-kind property received in a nontaxable exchange.

The building used in Manuel's business was condemned by the city of Mobile.Manuel received a condemnation award of $220,000.He paid $800 in lawyer's fees and $600 for an appraisal of the property.Manuel's adjusted basis in the building was $120,000.Manuel reinvests in similar property costing $200,000,and Manuel makes the proper election regarding the property.Manuel's basis in the new building is

Which of the following statements is false with regard to the ownership and use tests under Sec.121?

Indicate with a "yes" or a "no" which of the following are like-kind exchanges. a.Computer used in trade or business for office furniture used in trade or business. b.Apartment building held as an investment for an office building used in trade or business. c.Land used in trade or business for equipment used in trade or business. d.Printer used in trade or business for printer used for personal purposes. e.Exchange of improved real estate held for investment for unimproved real estate held for investment.

A owns a ranch in Wyoming,which B offers to purchase.A is not willing to sell the ranch but is willing to exchange the ranch for an apartment complex in Louisiana.The complex is available for sale.B purchases the apartment complex in Louisiana from C and transfers it to A in exchange for A's ranch.The ranch and the complex each have a $1,000,000 fair market value.Which of the following is true?

Frank,a single person age 52,sold his home this year.He had lived in the house for 10 years. He signed a contract on March 4 to sell his home and closed the sale on May 3. Based on these facts,what is the amount of his recognized gain?

If a principal residence is sold before satisfying the ownership and use tests,part of the gain may be excluded if the sale is due to a change in employment,health,or unforeseen circumstances.

The holding period of like-kind property received in a nontaxable exchange begins on the day of the exchange.