Exam 12: Property Transactions: Nontaxable Exchanges

Mitchell and Debbie,both 55 years old and married,sell their personal residence to Sophie.Sophie pays $225,000 and assumes their $70,000 mortgage.To make the sale they pay $4,000 in commissions and $1,000 in legal costs.They have owned and lived in the house for seven years and their tax basis is $125,000.What is the amount of gain recognized on the sale?

Nana is a self-employed consultant.For the past five years,she has used an extra bedroom (15% of the house)in her home as a qualifying home office and deducted $9,000 of depreciation expense.This year she sells the house for $740,000.The house cost $500,000.Nana is single.She will recognize gain on the sale of the house of

Stephanie's building,which was used in her business,was destroyed in a fire.Stephanie's adjusted basis in the building was $175,000,and its FMV was $210,000.Stephanie filed an insurance claim and was reimbursed $200,000.In that same year,Stephanie invested $180,000 of the insurance proceeds in another business building.If the proper election is made,Stephanie will recognize gain of

Under what circumstances can a taxpayer obtain a partial exclusion if a home is sold before the use and ownership tests are satisfied?

Which of the following statements is false regarding involuntary conversions?

An investor exchanges an office building located in Niagara Falls,NY for an office building located in Niagara Falls,Ontario.The exchange does not qualify as like-kind.

Pamela owns land for investment purposes.The land is worth $300,000 (basis of $260,000 to Pamela).Pamela exchanges the land,plus $20,000 cash,for a warehouse to be used in her business.The FMV of the warehouse is $400,000,but the warehouse is subject to a mortgage of $80,000,which is assumed by Pamela.Pamela must recognize a gain of

Vector Inc.'s office building burns down on October 31,2015.Vector,a calendar year taxpayer,finally settles with the insurance company on February 3,2016.In order to defer the gain realized on the building,Vector must acquire another office building by February 3,2018.

Amelia exchanges an office building with a $350,000 adjusted basis for an airplane with a $560,000 fair market value to be used in business. a.What is the amount of gain or loss realized by Amelia? b.What is the amount of gain or loss recognized by Amelia?

If there is a like-kind exchange of property between related parties,how long do they have to wait to dispose of the property received in order to avoid having to recognize any gain on the exchange?

Kareem's office building is destroyed by fire on April 11,2016.Settlement is reached with the insurance company on November 1,2016 when he receives a check for $900,000.The property had recently been appraised for $920,000.Kareem's adjusted basis in the building was $800,000. a.What is Kareem's realized gain or loss? b.Assume Kareem wishes to defer the maximum amount of gain.Indicate: c.Assume that instead of a fire,the state forces Kareem to sell the property.Indicate how your responses to part b would differ.

Realized gain or loss must be recognized unless a specific Code section provides for nonrecognition treatment.

Sometimes taxpayers should structure a transaction to avoid the application of like-kind provisions.Which of the following conditions is likely to cause a taxpayer to avoid like-kind treatment?

Bobbie exchanges business equipment (adjusted basis $160,000)for other business equipment that has a FMV of $140,000.Bobbie also receives $30,000 cash.Bobbie's basis in the new equipment is

Rosa exchanges business equipment with a $60,000 adjusted basis for a like-kind piece of equipment with a $100,000 FMV and $20,000 of marketable securities.What is Rosa's basis for the new equipment?

If real property used in a trade or business or held for investment is condemned,it must be replaced with property having a similar functional use.

The building used in Tim's business was condemned by the city of Lafayette.Tim received a condemnation award of $125,000.He paid $1,200 in lawyer's fees and $800 for an appraisal of the property.Tim's adjusted basis in the building was $60,000.Tim reinvests in similar property costing $110,000,and Tim makes the proper election regarding the property.What is the amount of Tim's realized (not recognized)gain on the condemnation?

Theresa owns a yacht that is held for personal use and has a $100,000 basis.The yacht is destroyed by a storm and Theresa collects $120,000 from the insurance company.She purchases a new $150,000 yacht for personal use and elects to defer any gain on the transaction.What is the basis of the new yacht?

Patricia exchanges office equipment with an adjusted basis of $20,000 for $5,000 cash and office equipment with a fair market value of $12,000. a.What is the gain or loss realized? b.What is the gain or loss recognized? c.What is the adjusted basis of the new office equipment?

Summer exchanges an office building used in her business for another office building.Summer's office building has a FMV of $250,000 (basis of $180,000).The FMV of the new building is $300,000,and it is subject to a mortgage of $60,000,which is assumed by Summer.Summer also pays the other party $40,000 cash. a.What is the amount of gain realized by Summer? b.What is the amount of gain recognized by Summer? c.What is the basis of the new building to Summer?