Question 1

Which of the following qualify as a like-kind exchange?
-Microsoft common stock for Merrill Lynch common stock.

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

Question 2

Ed and Elise got married during the year and they each sold their homes to buy a new house for them to live in.As long as they file a joint return they can each claim a $250,000 exclusion.

Accepted Answer

A) True 
 B)False

Question 3

Commonalties of nonrecognition transactions include that
I.deferring a loss is mandatory on like-kind exchanges.
II.deferring a loss is mandatory on involuntary conversions.

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 4

Which of the following can be income deferral transactions?
I.Exchanges of like-kind property.
II.Involuntary conversions of 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.

Question 5

Rosilyn trades her old business-use car with an adjusted basis of $13,000 and an outstanding loan liability balance of $2,000 for a new business-use car valued at $9,000 plus $3,000 cash from Bob's Auto Sales and Loan Company.Bob assumes Rosilyn's loan balance.What is Rosilyn's basis in her new car?

Accepted Answer

A) $ - 0 - 
B) $ 9,000 
C) $11,000 
D) $12,000 
E) $14,000 
A) $ - 0 - 
B) $ 9,000 
C) $11,000 
D) $12,000 
E) $14,000

Question 6

Nancy acquired office equipment for her business in 2010 at a cost of $15,000.During the current year,she exchanges the equipment for different equipment with a fair market value of $9,000.MACRS depreciation on the original equipment was $9,828.The exchange qualifies as a like-kind exchange.Immediately after the exchange Nancy sells the new equipment for $9,000 cash.What is the amount and character of the gain recognized?

Accepted Answer

A) No gain or loss. 
B) $3,828 Section 1231 gain. 
C) $3,828 Section 1245 ordinary income. 
D) $6,000 Section 1245 ordinary income 
E) $9,828 section 1245 ordinary income and $6,000 Section 1231 loss. 
A) No gain or loss. 
B) $3,828 Section 1231 gain. 
C) $3,828 Section 1245 ordinary income. 
D) $6,000 Section 1245 ordinary income 
E) $9,828 section 1245 ordinary income and $6,000 Section 1231 loss.

Question 7

The mechanism for effecting a deferral in a nonrecognition transaction is an adjustment of the replacement asset's basis.

Accepted Answer

A) True 
 B)False

Question 8

A flood destroys Owen's building that cost $100,000 in 2007,which has an adjusted basis of $80,000.Owen's insurance company reimburses him $125,000 for his loss.Owen promptly reconstructs the building for $115,000.What is the minimum amount of gain that Owen must recognize and his basis in the new building?
$$\begin{array} { c c c } 
& { \text { Recognized } } & \text { New } \
& \text { Gain } & \text { Basis } \
\text { a. } & \$ - 0 - & \$ 80,000 \
\text { b. } & \$ - 0 - & \$ 115,000 \
\text { c. } & \$ 10,000 & \$ 80,000 \
\text { d. } & \$ 10,000 & \$ 115,000 \
\text { e. } & \$ 10,000 & \$ 150,000
\end{array}$$

Accepted Answer

The answer of A flood destroys Owen's building that cost...

Question 9

Carrie owns a business building with an adjusted basis of $95,000 and an appraised fair market value of $98,000.The city of Millerville condemns the property for a new highway.The condemnation award is $98,000.Carrie invests $90,000 of the proceeds into a new building on the other side of the city.What is the gain or loss that Carrie must recognize due to the transactions?

Accepted Answer

A) No gain or loss 
B) $3,000 gain 
C) $3,000 loss 
D) $8,000 gain 
E) $5,000 loss 
A) No gain or loss 
B) $3,000 gain 
C) $3,000 loss 
D) $8,000 gain 
E) $5,000 loss

Question 10

Compare the deferral of recognition of losses resulting from an involuntary conversion with the deferrals for like-kind exchanges.

Accepted Answer

Deferral provisions do not apply to loss

Question 11

In general,qualified replacement property for an involuntary conversion must be purchased within one year after the close of the tax year in which the involuntary conversion occurred.

Accepted Answer

A) True 
 B)False

Question 12

A fire destroys David's business building that cost $200,000 in 2005 and had an adjusted basis of $160,000.David's insurance company reimburses him $250,000 for his loss.David promptly reconstructs the building for $230,000.
a.What is the amount and the character of David's minimum recognized gain (loss)?
b.What is the basis of David's new building?

Accepted Answer

a.David must recognize an unrecaptured S

Question 13

Which of the following is/are correct regarding the sale of a principal residence?
I.A single taxpayer can only use the $250,000 exclusion once every 3 years.
II.Married taxpayers who both meet the ownership and use tests and file jointly can each exclude $250,000 of gain ($500,000 total)on the sale of their principal residence.

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 14

Rationale for nonrecognition includes which of the following?
I.A refinement of the realization concept,which postpones recognition of appreciation in value until the taxpayer disposes of a property,or its replacement.
II.Under the Substance-over-form doctrine,new property acquired in a transaction is viewed as a continuation of the original investment.
III.The taxpayer lacks wherewithal to pay the tax on a realized gain because the amount realized on the transaction is reinvested in the replacement asset.

Accepted Answer

A) Only II is correct. 
B) Only I is correct. 
C) II and III are correct. 
D) I, II, and III are correct. 
E) Only III is correct. 
A) Only II is correct. 
B) Only I is correct. 
C) II and III are correct. 
D) I, II, and III are correct. 
E) Only III is correct.

Question 15

Which of the following qualify as a like-kind exchange?
-Personal residence for an apartment building.

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

Question 16

The holding period of an asset received in a like-kind exchange includes the holding period of the transferred asset.

Accepted Answer

A) True 
 B)False

Question 17

Rebecca trades in her four-wheel drive truck for a new one.Rebecca's truck cost $20,000 and has an $8,000 basis on the date of the trade-in.The price of the new truck is $27,000 and the dealer gives Rebecca a $10,000 trade in allowance on her old truck.She uses the trucks in her business.What is Rebecca's basis in the new truck?

Accepted Answer

A) $ 8,000 
B) $18,000 
C) $25,000 
D) $27,000 
E) $29,000 
A) $ 8,000 
B) $18,000 
C) $25,000 
D) $27,000 
E) $29,000

Question 18

Match each statement with the correct term below.
-Like-kind property

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 19

Rationale for nonrecognition of property transactions exists because of which concept(s)of taxation?
I.Wherewithal-to-Pay Concept.
II.Constructive receipt Doctrine.

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

Rosilyn trades her old business-use car with an adjusted basis of $13,000 and an outstanding loan liability balance of $2,000 for a new business-use car valued at $9,000 plus $3,000 cash from Bob's Auto Sales and Loan Company.Bob assumes Rosilyn's loan balance.What is Rosilyn's recognized gain on the transaction?

Accepted Answer

A) $ - 0 - 
B) $1,000 
C) $2,000 
D) $3,000 
E) $5,000 
A) $ - 0 - 
B) $1,000 
C) $2,000 
D) $3,000 
E) $5,000

Which of the following qualify as a like-kind exchange? -Microsoft common stock for Merrill Lynch common stock.

Ed and Elise got married during the year and they each sold their homes to buy a new house for them to live in.As long as they file a joint return they can each claim a $250,000 exclusion.

Commonalties of nonrecognition transactions include that I.deferring a loss is mandatory on like-kind exchanges. II.deferring a loss is mandatory on involuntary conversions.

Which of the following can be income deferral transactions? I.Exchanges of like-kind property. II.Involuntary conversions of property.

Rosilyn trades her old business-use car with an adjusted basis of $13,000 and an outstanding loan liability balance of $2,000 for a new business-use car valued at $9,000 plus $3,000 cash from Bob's Auto Sales and Loan Company.Bob assumes Rosilyn's loan balance.What is Rosilyn's basis in her new car?

The mechanism for effecting a deferral in a nonrecognition transaction is an adjustment of the replacement asset's basis.

Compare the deferral of recognition of losses resulting from an involuntary conversion with the deferrals for like-kind exchanges.

In general,qualified replacement property for an involuntary conversion must be purchased within one year after the close of the tax year in which the involuntary conversion occurred.

Which of the following qualify as a like-kind exchange? -Personal residence for an apartment building.

The holding period of an asset received in a like-kind exchange includes the holding period of the transferred asset.

Match each statement with the correct term below. -Like-kind property

Rationale for nonrecognition of property transactions exists because of which concept(s)of taxation? I.Wherewithal-to-Pay Concept. II.Constructive receipt Doctrine.

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? -Microsoft common stock for Merrill Lynch common stock.

Ed and Elise got married during the year and they each sold their homes to buy a new house for them to live in.As long as they file a joint return they can each claim a $250,000 exclusion.

Commonalties of nonrecognition transactions include that I.deferring a loss is mandatory on like-kind exchanges. II.deferring a loss is mandatory on involuntary conversions.

Which of the following can be income deferral transactions? I.Exchanges of like-kind property. II.Involuntary conversions of property.

The mechanism for effecting a deferral in a nonrecognition transaction is an adjustment of the replacement asset's basis.

Compare the deferral of recognition of losses resulting from an involuntary conversion with the deferrals for like-kind exchanges.

In general,qualified replacement property for an involuntary conversion must be purchased within one year after the close of the tax year in which the involuntary conversion occurred.

Which of the following qualify as a like-kind exchange? -Personal residence for an apartment building.

The holding period of an asset received in a like-kind exchange includes the holding period of the transferred asset.

Match each statement with the correct term below. -Like-kind property

Rationale for nonrecognition of property transactions exists because of which concept(s)of taxation? I.Wherewithal-to-Pay Concept. II.Constructive receipt Doctrine.

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