Question 1

Which of the following qualify as a like-kind exchange?
-A personal residence for a vacation home.

Accepted Answer

A) qualifies as a like-kind exchange 
B) does not qualify as a like-kind exchange 
A) qualifies as a like-kind exchange 
B) does not qualify as a like-kind exchange B

Question 2

Which of the following is/are correct regarding involuntary conversions?
I.Gains may be deferred if the property involuntarily converted is replaced with property that is similar to or related in service or use to the converted property.
II.Deferral of gains is elective only if direct conversion is made into similar property.

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. A

Question 3

Norman exchanges a machine he uses in his pool construction business for a used machine worth $6,000 to use in the same business.He purchased the machine 3 years ago for $22,000 and has taken depreciation of $9,000 on the machine.In the exchange,Norman also receives $3,000 of cash.As a result of the exchange,
I.Norman's basis in the acquired machine is $10,000.
II.Norman recognizes a loss of $3,000 on the exchange.

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. A

Question 4

Which of the following is/are correct regarding the deferral of gain attributable to the involuntary conversion of personal property (personalty)?
I.Gain deferral is mandatory.
II.Replacement property must be acquired within one year of the close of the tax year in which gain is realized from an involuntary property damage conversion.

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Question 5

Grant exchanges an old pizza oven from his business for a new oven.In addition to the old oven,which has a basis of $10,000,Grant pays $4,000 cash and takes out a loan on the new oven for $6,000.The new oven is valued at $22,000.What is Grant's recognized gain or loss due on this transaction?

Accepted Answer

A) $ - 0 - 
B) $ 2,000 
C) $12,000 
D) $16,000 
E) $22,000 
A) $ - 0 - 
B) $ 2,000 
C) $12,000 
D) $16,000 
E) $22,000

Question 6

For related parties to qualify for a like-kind exchange,the property received must be held for six months.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following statements is/are correct?
I.The carryover-holding period only applies if the property exchanged is personal-use property.
II.The holding period of like-kind property received includes the holding period of the property exchanged.

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Question 8

Match each statement with the correct term below.
-Wherewithal-to-pay

Accepted Answer

A) Losses are never deferred. 
B) Can be within the same NAICS Code. 
C) Not considered like-kind property. 
D) A taxpayer can have only one at a time. 
E) The maximum amount that can be recognized on a like-kind exchange.
F)This type of exchange must be completed within 180 days of first property transfer.
G)The concept upon which the ability to defer gains on certain nontaxable transactions relies. 
A) Losses are never deferred. 
B) Can be within the same NAICS Code. 
C) Not considered like-kind property. 
D) A taxpayer can have only one at a time. 
E) The maximum amount that can be recognized on a like-kind exchange.
F)This type of exchange must be completed within 180 days of first property transfer.
G)The concept upon which the ability to defer gains on certain nontaxable transactions relies.

Question 9

Drake and Cynthia sell their home for $475,000,incurring selling expenses of $20,000.They had purchased the residence in 1998 for $105,000 and made capital improvements totaling $25,000.They buy a new residence for $210,000.What is their realized gain and recognized gain on the sale?
 What is their basis in the new house?

Accepted Answer

Drake and Cynthia have a realized gain o

Question 10

Commonalties of nonrecognition transactions include that
I.gains on all transactions must be recognized when the taxpayer has the wherewithal-to-pay.
II.tax attributes carryover from the original asset to the replacement asset.

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Question 11

Mavis is a schoolteacher with an annual salary of $28,000.Last year she sold a substantial block of securities that she had inherited from her grandmother several years before.She used the proceeds to buy an apartment building in a neighboring community.She realized a $15,000 capital loss on the sale.She carries over $12,000 of the capital loss to the current year.During the current year,a fire destroys the apartment building when its adjusted basis is $100,000.Mavis receives an insurance check for $110,000 and immediately invests it in another apartment building.Advise Mavis how she should deal with these situations for the current tax year.

Accepted Answer

Deferral of realized gains through invol

Question 12

Taxpayers are allowed to structure transactions through third parties that qualify as exchanges if they meet certain time requirements for identifying properties and closing the transaction.

Accepted Answer

A) True 
 B)False

Question 13

Lindsey exchanges investment real estate parcels with Donna.Lindsay's adjusted basis in the property is $400,000,and it is encumbered by a mortgage liability of $200,000.Donna assumes the mortgage.Donna's property is appraised at $1,000,000 and is subject to a $100,000 liability.Lindsey assumes the liability.If no cash is exchanged,what is Lindsey's basis in the new real estate?

Accepted Answer

A) $ - 0 - 
B) $100,000 
C) $200,000 
D) $400,000 
E) $600,000 
A) $ - 0 - 
B) $100,000 
C) $200,000 
D) $400,000 
E) $600,000

Question 14

Which of the following is/are correct concerning a principal residence?
I.The maximum amount of gain a single taxpayer can exclude on the sale of a principal residence is $500,000.
II.To qualify for a $250,000 exclusion,a single taxpayer must have owned and used the property as a principal residence for at least 2 of the previous 5 years.

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Question 15

Discuss the concepts underlying the determination of the basis of property received in a nontaxable exchange.

Accepted Answer

The underlying concepts include capital

Question 16

In each of the following cases,determine the amount of realized gain or loss and the recognized gain or loss:
a.Silvia sells her house for $100,000 and she pays $8,000 in commissions on the sale. She paid $110,000 for the house 2 years earlier.
b.In July 2012, Carmen, who is single, is transferred to Dallas. She had purchased a new home in June 2013 for $130,000. Carmen sells the house for $165,000 and pays a commission of $10,000 on the sale.
c.Conrad is single and sells his principal residence for $350,000. He pays selling expenses of $20,000. Conrad purchased the house for $65,000 in 1986.

Accepted Answer

a.Silvia has realized a loss of $12,000

Question 17

Discuss the type of property that is qualified replacement property for involuntary conversion provisions for gain deferrals.

Accepted Answer

Qualified replacement property must be "

Question 18

Charlotte purchases a residence for $105,000 on April 13,2005.On July 1,2011,she marries Howard and they use Charlotte's house as their principal residence.On May 12,2013,they sell their home for $390,000,incurring $20,000 of selling expenses and purchase another residence costing $350,000.What is their realized and recognized gain?
$\begin{array}{clc} 
& \text { Realized } & \text { Recognized } \
\text { a. } & \$ 265,000 & \$-0- \
\text { b. } & \$ 265,000 & \$ 15,000 \
\text { c. } & \$ 285,000 & \$ 65,000 \
\text { d. }& \$ 265,000 & \$ 45,000 \
\text { e. } &\$ 285,000 & \$-0-
\end{array}$

Accepted Answer

The answer of Charlotte purchases a residence for $105,000 on...

Question 19

Which of the following qualify as replacement property under the involuntary conversion rules?
I.Mayfield Ice Cream Company's production plant is destroyed by a hurricane.The insurance proceeds are used to replace the plant with a refrigerated storage container.
II.Mayfield Ice Cream Company's production plant is destroyed by a fire.They sign a five year lease for a replacement production facility,and the insurance proceeds are then used to buy an office building

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Question 20

Which of the following qualify as a like-kind exchange?
-A business use automobile for a personal use automobile.

Accepted Answer

A) qualifies as a like-kind exchange 
B) does not qualify as a like-kind exchange 
A) qualifies as a like-kind exchange 
B) does not qualify as a like-kind exchange

Which of the following qualify as a like-kind exchange? -A personal residence for a vacation home.

Grant exchanges an old pizza oven from his business for a new oven.In addition to the old oven,which has a basis of $10,000,Grant pays $4,000 cash and takes out a loan on the new oven for $6,000.The new oven is valued at $22,000.What is Grant's recognized gain or loss due on this transaction?

For related parties to qualify for a like-kind exchange,the property received must be held for six months.

Which of the following statements is/are correct? I.The carryover-holding period only applies if the property exchanged is personal-use property. II.The holding period of like-kind property received includes the holding period of the property exchanged.

Match each statement with the correct term below. -Wherewithal-to-pay

Commonalties of nonrecognition transactions include that I.gains on all transactions must be recognized when the taxpayer has the wherewithal-to-pay. II.tax attributes carryover from the original asset to the replacement asset.

Taxpayers are allowed to structure transactions through third parties that qualify as exchanges if they meet certain time requirements for identifying properties and closing the transaction.

Discuss the concepts underlying the determination of the basis of property received in a nontaxable exchange.

Discuss the type of property that is qualified replacement property for involuntary conversion provisions for gain deferrals.

Which of the following qualify as a like-kind exchange? -A business use automobile for a personal use automobile.

Federal Income Taxation - an Overview

Income Tax Concepts

Income Sources

Income Exclusions

Introduction to Business Expenses

Business Expenses

Losses: Deductions and Limitations

Taxation of Individuals

Acquisitions of Property

Cost Recovery on Property: Depreciation,depletion,and Amortization

Property Dispositions

Choice of Business Entity - General Tax and Nontax Factorsformation

Choice of Business Entity - Operations and Distributions

Choice of Business Entity - Other Considerations

Tax Research

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Exam 12: Nonrecognition Transactions

Which of the following qualify as a like-kind exchange? -A personal residence for a vacation home.

Grant exchanges an old pizza oven from his business for a new oven.In addition to the old oven,which has a basis of $10,000,Grant pays $4,000 cash and takes out a loan on the new oven for $6,000.The new oven is valued at $22,000.What is Grant's recognized gain or loss due on this transaction?

For related parties to qualify for a like-kind exchange,the property received must be held for six months.

Which of the following statements is/are correct? I.The carryover-holding period only applies if the property exchanged is personal-use property. II.The holding period of like-kind property received includes the holding period of the property exchanged.

Match each statement with the correct term below. -Wherewithal-to-pay

Commonalties of nonrecognition transactions include that I.gains on all transactions must be recognized when the taxpayer has the wherewithal-to-pay. II.tax attributes carryover from the original asset to the replacement asset.

Taxpayers are allowed to structure transactions through third parties that qualify as exchanges if they meet certain time requirements for identifying properties and closing the transaction.

Discuss the concepts underlying the determination of the basis of property received in a nontaxable exchange.

Discuss the type of property that is qualified replacement property for involuntary conversion provisions for gain deferrals.

Which of the following qualify as a like-kind exchange? -A business use automobile for a personal use automobile.

Federal Income Taxation - an Overview

Income Tax Concepts

Income Sources

Income Exclusions

Introduction to Business Expenses

Business Expenses

Losses: Deductions and Limitations

Taxation of Individuals

Acquisitions of Property

Cost Recovery on Property: Depreciation,depletion,and Amortization

Property Dispositions

Choice of Business Entity - General Tax and Nontax Factorsformation

Choice of Business Entity - Operations and Distributions

Choice of Business Entity - Other Considerations

Tax Research

Filters