Exam 27: Property Transactions: Nontaxable Exchanges

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. Sales price \ 600,000 Selling expenses 15,000 Replaced and paid for a broken window on March 2 800 Basis of old home before repairs and improvements 310,000 Based on these facts, what is the amount of his recognized gain?

Kai owns an apartment building held for investment purposes. The apartment building is worth $500,000, although it is subject to a mortgage of $100,000. Kai's basis in the apartment building is $380,000. Kai exchanges the apartment building for an office building. The office building has an FMV of $350,000. Kai receives $50,000 cash in addition to receiving the office building, and the other party assumes the apartment building mortgage. What is Kai's recognized gain on this exchange?

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?

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?

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.

Marinda exchanges an office building worth $800,000 (basis is $820,000) for a warehouse worth $850,000. A part of the exchange she also transfers $50,000 worth of securities which she purchased for $40,000. a. What are Marinda's realized and recognized gains (losses) on the two assets exchanged? b. What is Marinda's basis in the warehouse acquired?

All of the following are true except:

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.

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?

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?

An office building owned by Abby and used in her business was destroyed in a fire. Abby's adjusted basis in the building was $145,000 and its FMV was $180,000. Abby filed an insurance claim and she was reimbursed $160,000. In that same year, Abby invested $150,000 of the insurance proceeds in another business building. a. Assume Abby made the proper election with regard to the involuntary conversion. What is the amount of gain to be recognized by Abby? b. What is Abby's basis in the new building?

The exchange of a partnership interest for an interest in another partnership qualifies as a like-kind exchange.

Ron and Fay live in Buffalo. They also own a condominium in Orlando (purchased in 2011) which they rent to vacationers. Ron and Fay will be retiring. They plan to live in the Orlando property for two and a half years. When they sell it, they will be able to exclude the full gain which is expected to be about $200,000.

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?

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.

Alex owns an office building which the state condemns on January 15, 2016. Alex receives the condemnation award on April 1, 2016. In order to qualify for nonrecognition of gain on this involuntary conversion, what is the last date for Alex to acquire qualified replacement property?

An exchange of inventory for inventory of a like kind qualifies as a like-kind exchange.

Jenna, who is single, sold her principal residence on December 1, 2015, and excluded the $150,000 gain because she met the ownership and usage requirements under Sec. 121. Jenna purchased another residence in Pensacola on January 1, 2016 that she occupied until July 1, 2016 when she receives a new job offer from an employer in Miami. She sells the Pensacola residence on October 1, 2016 and realizes a gain of $40,000. Jenna may exclude what amount of the gain from the sale on October 1, 2016?

The exchange of antiques held for investment purposes for stock in an antiques auction house held as an investment qualifies for like-kind treatment.

If related taxpayers exchange property qualifying for a like-kind exchange, the properties must be retained for three years after the exchange to prevent recognition of gain resulting from the original exchange on a subsequent disposition of the property.