Exam 27: Property Transactions: Nontaxable Exchanges

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?

Which of the following statements is false regarding involuntary conversions?

Rolf exchanges an office building worth $150,000 for investment land worth $175,000. He also provided stock worth $25,000. Rolf's adjusted basis in the building and stock is $130,000 and $11,000, respectively. How much gain will Rolf recognize on the exchange?

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

Cassie owns a Rembrandt painting she acquired on June 1, 2008 as an investment. She exchanges the painting on September 5, 2016, for a Picasso painting and marketable securities to be held as an investment. On what date does the Picasso painting's holding period begin?

Bob owns a warehouse that is used in business while Rebecca owns land. Bob exchanges the warehouse for the land, which will be held for investment. The FMV of the warehouse is $440,000 (basis $240,000), but the warehouse is subject to a mortgage of $80,000, which is assumed by Rebecca. Bob receives $40,000 cash and the land, which has a FMV of $320,000. Bob realizes a gain (loss) on the exchange of

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

Real property exchanged for personal property, both held for productive use in a business, qualifies as a like-kind exchange.

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?

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.

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.

The basis of non-like-kind property received is the basis in the hands of the transferor at the date of the exchange.

A taxpayer exchanges an office building held as an investment asset for an office building to be used in her business. The exchange will qualify as like-kind.

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?

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: (1) the minimum amount that must be spent on a new property. (2) any restrictions on the new property in order for it to qualify, (3) the deadline for placing the new property in service. c. Assume that instead of a fire, the state forces Kareem to sell the property. Indicate how your responses to part b would differ.

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

Hannah, a single taxpayer, sold her primary residence on January 1, 2016. Her total realized gain is $210,000. The house was acquired on January 1, 2006 and rented to tenants until December 31, 2012. Hannah moved in on January 1, 2013 and used the house as her principal residence until the sale. During the rental period, $30,000 of depreciation was deducted. Due to the sale of the house in 2016, Hannah will recognize a gain of

Ron's building, which was used in his business, was destroyed in a fire. Ron's adjusted basis in the building was $210,000, and its FMV was $330,000. Ron filed an insurance claim and was reimbursed $300,000. In that same year, Ron invested $240,000 of the insurance proceeds in another business building. Ron will recognize gain of

Yael exchanges an office building worth $150,000 for investment land worth $175,000. He also provided stock worth $25,000. Yael's adjusted basis in the building and stock is $180,000 and $11,000, respectively. How much gain or loss will Yael recognize on the exchange?

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.