Exam 24: Property Transactions: Nontaxable Exchanges

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?

If property is involuntarily converted into similar property,the basis and holding period of the converted property carry over to the basis and holding period of the replacement property.

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

Ike and Tina married and moved into their new home (purchase price $800,000)18 months ago.They are thinking of selling the home which is now worth $1,300,000.They plan to reinvest in a smaller home costing approximately $600,000.What should they consider before selling their home?

Pierce,a single person age 60,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. Based on these facts,what is the amount of his recognized gain?

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?

For purposes of nontaxable exchanges,cash and non-like-kind property constitute boot.

The receipt of boot as part of a nontaxable exchange causes a realized loss to be recognized.

Which of the following statements is false regarding involuntary conversions?

James and Ellen Connors,who are both 50 years old and married,sell their personal residence on July 25,2015 for $950,000.They have lived in the home for 20 years.The basis of the home is $350,000.They purchased a new home for $1,000,000 in August 2015.After living in that home for 219 days,the Connors were forced to sell their new home in 2016 for $1,300,000 and move to another climate due to Ellen's severe health problems. a.What is the amount of gain recognized on the home sale in 2015? b.What is the amount of the gain recognized on the home sale in 2016?

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.

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

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

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?

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.Assuming the proper election is made to defer gain,Stephanie's basis in the new building will be

Eric exchanges a printing press with an adjusted basis of $64,000 for a smaller model with a $100,000 fair market value.In addition,he receives $20,000 of marketable securities. a.What is the amount of gain realized by Eric? b.What is the amount of gain recognized by Eric? c.What is Eric's basis in the new printing press? d.What is Eric's basis in the marketable securities?

Each of the following is true of deferral of gain attributable to the involuntary conversion of personal property with the exception of

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?

Vector Inc.'s office building burns down on October 31,2014.Vector,a calendar year taxpayer,finally settles with the insurance company on February 3,2015.In order to defer the gain realized on the building,Vector must acquire another office building by February 3,2017.

If a taxpayer owns more than one home,she can designate the home that will be considered her principal residence for purposes of the Sec.121 exclusion.