Exam 28: Property Transactions: Nontaxable Exchanges

Ella needs to move her business to a larger facility.She projects a large realized gain on the sale of the old building and prefers not to pay tax on the gain because the sales proceeds are needed to finance the purchase of the new building.In the circumstances,a direct two- or three-party like-kind exchange is not feasible.Ella's sale can still qualify for like-kind treatment if she arranges an appropriate nonsimultaneous exchange.Among other criteria,after the transfer of the old building,the replacement property must be

A sale of property and subsequent purchase of like-kind property may be treated as a like-kind exchange if the two transactions are interdependent.

Daniella exchanges business land with a $100,000 adjusted basis for $10,000 cash and business land with a $96,000 FMV.What is the amount of gain recognized on the exchange?

Frank,a single person,sold his home this year.He had owned and lived in the house for 10 years.Frank signed a contract on March 4 to sell his home and closed the sale on May 3. Sales price \ 202,000 Selling expenses paid by Frank 12,000 Replaced a broken window on March 2 200 Basis of old home before repairs and improvements 150,000 Based on these facts,what is the amount of his recognized gain?

Which of the following statements is false regarding involuntary conversions?

A taxpayer conducts a qualifying like-kind exchange.There is no boot involved in the transaction.The basis of the property received will equal the adjusted basis of the property exchanged.

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 to defer gain,Stephanie will recognize gain of

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?

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

The exchange of land held for investment purposes for stock in a real estate holding corporation held as an investment qualifies for like-kind treatment.

Glen owns a building that is used in business.The building is worth $200,000,but is subject to a mortgage of $40,000.Glen's basis in the building is $120,000.Glen exchanges the building for investment land worth $150,000 plus $10,000 cash.In addition,the other party assumes the mortgage which will be held for investment.Glen must recognize a gain of

The building used in Terry's business was condemned by the city of St.Louis.Terry received a condemnation award of $125,000.He paid $1,200 in lawyer's fees and $800 for an appraisal of the property.Terry's adjusted basis in the building was $60,000.Terry reinvests in similar property costing $110,000,and Terry makes the proper election regarding the property.What is the amount of Terry's recognized gain on the condemnation?

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

Which of the following statements regarding involuntary conversions is incorrect?

A taxpayer may elect to defer recognition of a loss resulting from an involuntary conversion.

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

Risa exchanges an office building with a $600,000 adjusted basis for an apartment building with a $1,000,000 FMV and $200,000 of marketable securities.The other party indicates he had paid $175,000 for the securities a year earlier.What is Risa's basis for the securities?

Yael exchanges an office building worth $150,000 for investment land worth $175,000.Yael also transferred stock worth $25,000 to the other party.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?

Vector Inc.'s office building burned down on October 31,2017.Vector,a calendar-year taxpayer,finally settles with the insurance company on February 3,2018.In order to defer the gain realized on the building,Vector must acquire another office building by February 3,2020.

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.