Question 1

The $250,000/$500,000 exclusion for gain on the sale of a personal residence is only available to taxpayers who are age 55 or older.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A) $ 0. 
B) $15,000. 
C) $20,000. 
D) $25,000. 
A) $ 0. 
B) $15,000. 
C) $20,000. 
D) $25,000.

Question 3

The involuntary conversion provisions which allow deferral of gain are mandatory.

Accepted Answer

A) True 
 B)False

Question 4

If a gain is realized on the involuntary conversion of property,the gain may be deferred if qualifying replacement property is acquired within a specified time period at a cost equal to or greater than the amount realized on the involuntary conversion.

Accepted Answer

A) True 
 B)False

Question 5

In a like-kind exchange,both the property transferred and the property received must be held by the taxpayer either for productive use in a trade or business or for investment.

Accepted Answer

A) True 
 B)False

Question 6

Trent,who is in the business of racing horses,exchanges a racehorse with a basis of $80,000 for $40,000 cash and a trotter (another racehorse)with a $150,000 fair market value.
a.What is the amount of gain realized by Trent?
b.What is the amount of gain recognized by Trent?
c.What is the adjusted basis of the trotter?

Accepted Answer

a.The gain realized is $110,000 [($150,0

Question 7

In the case of married taxpayers,an individual may claim the Sec.121 exclusion even if the individual's spouse used the exclusion within the past two years.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) Temporarily renting property that was formerly the taxpayer's principal residence does not automatically preclude the use of Sec.121. 
B) To qualify for favorable tax treatment under Sec.121,the residence must be either the taxpayer's principal residence or a secondary residence. 
C) In the case of married taxpayers,an individual may claim the exclusion even if the individual's spouse used the exclusion within the past two years. 
D) Houseboats,house trailers,and condominium apartments may qualify as a principal residence. 
A) Temporarily renting property that was formerly the taxpayer's principal residence does not automatically preclude the use of Sec.121. 
B) To qualify for favorable tax treatment under Sec.121,the residence must be either the taxpayer's principal residence or a secondary residence. 
C) In the case of married taxpayers,an individual may claim the exclusion even if the individual's spouse used the exclusion within the past two years. 
D) Houseboats,house trailers,and condominium apartments may qualify as a principal residence.

Question 9

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.

Accepted Answer

A) True 
 B)False

Question 10

Alex owns an office building which the state condemns on January 15,2015.Alex receives the condemnation award on April 1,2015.In order to qualify for nonrecognition of gain on this involuntary conversion,what is the last date for Alex to acquire qualified replacement property?

Accepted Answer

A) April 1,2017 
B) April 1,2018 
C) December 31,2017 
D) December 31,2018 
A) April 1,2017 
B) April 1,2018 
C) December 31,2017 
D) December 31,2018

Question 11

Bob and Elizabeth,both 55 years old and married,sell their personal residence to Wolfgang.Wolfgang pays $660,000 and assumes their $90,000 mortgage.To make the sale they pay $20,000 in commissions and $10,000 in legal costs.They have owned and lived in the house for seven years and their tax basis is $200,000.What is the amount of gain recognized on the sale?

Accepted Answer

A) $0 
B) $20,000 
C) $50,000 
D) $520,000 
A) $0 
B) $20,000 
C) $50,000 
D) $520,000

Question 12

Which of the following statements in not correct regarding the compliance requirements of an involuntary conversion?

Accepted Answer

A) The taxpayer elects the deferral by not reporting the gain as income for the first year in which the gain is realized although all relevant information regarding the event will be reported. 
B) A taxpayer who recognized the full gain and paid the taxes can later file a refund claim to elect the deferral if qualified property is acquired before the expiration of the replacement period. 
C) A taxpayer elects to defer the full gain in the year the gain is realized (year one),and no gain is reported on that year's tax return.Qualified replacement property is acquired in the following year (year two),but the full insurance proceeds are not spent so some gain must be recognized.The partial gain recognition will be reported on the tax return for year two. 
D) A taxpayer properly elected to defer the full realized gain in year one and provides appropriate information on the replacement property.The taxpayer cannot later revoke the election and designate a different property as the replacement property. 
A) The taxpayer elects the deferral by not reporting the gain as income for the first year in which the gain is realized although all relevant information regarding the event will be reported. 
B) A taxpayer who recognized the full gain and paid the taxes can later file a refund claim to elect the deferral if qualified property is acquired before the expiration of the replacement period. 
C) A taxpayer elects to defer the full gain in the year the gain is realized (year one),and no gain is reported on that year's tax return.Qualified replacement property is acquired in the following year (year two),but the full insurance proceeds are not spent so some gain must be recognized.The partial gain recognition will be reported on the tax return for year two. 
D) A taxpayer properly elected to defer the full realized gain in year one and provides appropriate information on the replacement property.The taxpayer cannot later revoke the election and designate a different property as the replacement property.

Question 13

Juan's business delivery truck is destroyed in an accident.He paid $40,000 for the truck,and $30,000 of depreciation has been deducted during its period of use.The insurance company pays Juan $32,000 due to the accident.What is the minimum amount that Juan must spend on a new truck to avoid any gain recognition?

Accepted Answer

A) $40,000 
B) $32,000 
C) $10,000 
D) $22,000 
A) $40,000 
B) $32,000 
C) $10,000 
D) $22,000

Question 14

Discuss the basis rules of property received in a nontaxable like-kind exchange.

Accepted Answer

The basis of property received in a nont

Question 15

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

Accepted Answer

A) $ 0. 
B) $40,000. 
C) $50,000. 
D) $70,000. 
A) $ 0. 
B) $40,000. 
C) $50,000. 
D) $70,000.

Question 16

Which of the following is not an unforeseen circumstance for purposes of obtaining a partial exclusion of a gain on the sale of a home?

Accepted Answer

A) loss of employment by the qualified individual if the individual is eligible for unemployment compensation 
B) natural or man-made disaster resulting in a casualty to the residence 
C) birth of one child 
D) divorce or legal separation 
A) loss of employment by the qualified individual if the individual is eligible for unemployment compensation 
B) natural or man-made disaster resulting in a casualty to the residence 
C) birth of one child 
D) divorce or legal separation

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

Which of the following statements is not true with regard to like-kind exchanges?

Accepted Answer

A) Nonrecognition of gains and losses is mandatory if the exchange is a like-kind exchange. 
B) The holding period of like-kind property received includes the holding period of the property exchanged. 
C) A loss is always recognized if the taxpayer transfers non-like-kind personal use property (e.g.a personal use car)in an otherwise like-kind exchange. 
D) The basis of property received in an exchange is equal to the basis of the property exchanged less the boot received plus the gain recognized and less any loss recognized. 
A) Nonrecognition of gains and losses is mandatory if the exchange is a like-kind exchange. 
B) The holding period of like-kind property received includes the holding period of the property exchanged. 
C) A loss is always recognized if the taxpayer transfers non-like-kind personal use property (e.g.a personal use car)in an otherwise like-kind exchange. 
D) The basis of property received in an exchange is equal to the basis of the property exchanged less the boot received plus the gain recognized and less any loss recognized.

Question 19

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?

Accepted Answer

A) The transaction qualifies as a like-kind exchange for B but not for A. 
B) The transaction qualifies as a like-kind exchange for both B and A. 
C) The transaction qualifies as a like-kind exchange for A but not for B. 
D) The transaction does not qualify as a like-kind exchange for either B or A. 
A) The transaction qualifies as a like-kind exchange for B but not for A. 
B) The transaction qualifies as a like-kind exchange for both B and A. 
C) The transaction qualifies as a like-kind exchange for A but not for B. 
D) The transaction does not qualify as a like-kind exchange for either B or A.

Question 20

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

Accepted Answer

A) $ 0. 
B) $ 40,000. 
C) $ 120,000. 
D) $ 140,000. 
A) $ 0. 
B) $ 40,000. 
C) $ 120,000. 
D) $ 140,000.

Exam 24: Property Transactions: Nontaxable Exchanges

The $250,000/$500,000 exclusion for gain on the sale of a personal residence is only available to taxpayers who are age 55 or older.

The involuntary conversion provisions which allow deferral of gain are mandatory.

If a gain is realized on the involuntary conversion of property,the gain may be deferred if qualifying replacement property is acquired within a specified time period at a cost equal to or greater than the amount realized on the involuntary conversion.

In a like-kind exchange,both the property transferred and the property received must be held by the taxpayer either for productive use in a trade or business or for investment.

In the case of married taxpayers,an individual may claim the Sec.121 exclusion even if the individual's spouse used the exclusion within the past two years.

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

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.

Alex owns an office building which the state condemns on January 15,2015.Alex receives the condemnation award on April 1,2015.In order to qualify for nonrecognition of gain on this involuntary conversion,what is the last date for Alex to acquire qualified replacement property?

Which of the following statements in not correct regarding the compliance requirements of an involuntary conversion?

Discuss the basis rules of property received in a nontaxable like-kind exchange.

Which of the following is not an unforeseen circumstance for purposes of obtaining a partial exclusion of a gain on the sale of a home?

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

Which of the following statements is not true with regard to like-kind exchanges?

Tax Research

an Introduction to Taxation

Corporate Formations and Capital Structure

Determination of Tax

The Corporate Income Tax

Gross Income: Inclusions

Corporate Nonliquidating Distributions

Gross Income: Exclusions

Other Corporate Tax Levies

Property Transactions: Capital Gains and Losses

Corporate Liquidating Distributions

Deductions and Losses

Corporate Acquisitions and Reorganizations

Itemized Deductions

Consolidated Tax Returns

Losses and Bad Debts

Partnership Formation and Operation

Employee Expenses and Deferred Compensation

Special Partnership Issues

Depreciation,cost Recovery,amortization,and Depletion

Corporations

Accounting Periods and Methods

The Gift Tax

The Estate Tax

Property Transactions: Section 1231 and Recapture

Income Taxation of Trusts and Estates

Special Tax Computation Methods,tax Credits,and Payment of Tax

Administrative Procedures

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