Question 1

Which of the following qualifies as a like-kind exchange of property?
I.Inventory for inventory.
II.Office equipment for a delivery van.

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 2

No taxable gain or loss is recognized on a like-kind exchange of an investment asset for a similar asset that will be held for investment if both assets consist of

Accepted Answer

A) Partnership interests. 
B) Convertible debentures. 
C) Mortgage notes 
D) Rental real estate located in different states. 
E) Common stock of companies in the same industry. 
A) Partnership interests. 
B) Convertible debentures. 
C) Mortgage notes 
D) Rental real estate located in different states. 
E) Common stock of companies in the same industry.

Question 3

Cindy exchanges investment real estate with Russell.Cindy purchased her realty two years ago for $280,000,and it is encumbered by a mortgage of $100,000 and has a fair market value of $320,000 when exchanged.Russell paid $80,000 cash for his property in 1999 and it is appraised at $150,000 on the day of the exchange.Russell assumes the debt on his new land and pays Cindy enough in cash to balance the exchange.What is Cindy's recognized gain (loss)on the exchange?

Accepted Answer

A) $ -0- 
B) $ 40,000 
C) $100,000 
D) $170,000 
A) $ -0- 
B) $ 40,000 
C) $100,000 
D) $170,000

Question 4

Classification of a nonrecognition transaction as a continuation of an investment requires a qualified replacement asset.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following qualifies as a like-kind exchange of property?
I.Commercial retail building and its land for an office building and its land.
II.Louisiana Oil,Inc.common stock for Louisiana Oil,Inc.corporate bonds.

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 6

Which of the following is/are correct regarding the sale of a principal residence?
I.A taxpayer who is single and fails to meet the ownership or use test due to change in employment is entitled to a pro rata share of the $250,000 exclusion.
II.A single taxpayer can exclude up to $250,000 of the gain on the sale of a vacation home.

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 7

Violet exchanges investment real estate with Russell.Violet's adjusted basis in her two-year old property is $280,000.The property is encumbered by a mortgage of $100,000 and has a fair market value of $320,000 when exchanged.Russell assumes that debt.Russell paid $80,000 cash for his property in 1999 and it is appraised at $150,000 on the day of the exchange.Russell pays Violet enough in cash to balance the exchange.What is Russell's recognized gain (loss)on the exchange?

Accepted Answer

A) $ -0- 
B) $ 70,000 
C) $ 80,000 
D) $150,000 
A) $ -0- 
B) $ 70,000 
C) $ 80,000 
D) $150,000

Question 8

Which of the following qualify as a like-kind exchange?
-Farm land for an office building and its land.

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 9

Match each statement with the correct term below.
-Third-party exchange

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 10

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 realized 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

Question 11

Which of the tax concept(s)allow for the deferral of gains on nonrecognition transactions?
I.Capital Recovery Concept.
II.Ability to Pay Concept.

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 12

Wendell owns 115 acres of land with a fair market value of $57,000.He purchased the land as an investment for $35,000 in 1993.Wendell trades the land for a 122-acre parcel adjacent to other property he owns.The 122 acres has a value of $57,000,and the exchange qualifies for like-kind deferral treatment.What is Wendell's recognized gain on the exchange?

Accepted Answer

A) $ - 0 - 
B) $22,000 
C) $35,000 
D) $57,000 
E) $79,000 
A) $ - 0 - 
B) $22,000 
C) $35,000 
D) $57,000 
E) $79,000

Question 13

A flood destroys Franklin's manufacturing facility.The building had a basis of $600,000 when destroyed.Franklin's insurance company reimburses him $850,000,the appraised replacement cost of the building.Franklin purchases a qualified replacement facility for $1,100,000.Discuss the tax effects of these transactions applying the concepts of taxation that drive your answers.

Accepted Answer

Franklin realizes a gain of $250,000 ($8

Question 14

Lindsey exchanges investment real estate parcels with Donna.Her 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 the amount of gain recognized by Lindsey?

Accepted Answer

A) $ - 0 - 
B) $100,000 
C) $200,000 
D) $500,000 
E) $900,000 
A) $ - 0 - 
B) $100,000 
C) $200,000 
D) $500,000 
E) $900,000

Question 15

An involuntary conversion occurs whenever a loss (but not a gain)is realized from a transaction that occurs against the taxpayer's will.

Accepted Answer

A) True 
 B)False

Question 16

The basis of replacement property in a nonrecognition transaction is the adjusted basis of the property received less any deferred gain.

Accepted Answer

A) True 
 B)False

Question 17

Willie owns 115 acres of land with a fair market value of $57,000.He purchased the land as an investment for $35,000 in 1993.Willie trades the land for a 122-acre parcel adjacent to other property he owns.The 122 acres has a value of $57,000,and the exchange qualifies for like-kind deferral treatment.What is Willie's basis in the new parcel of land?

Accepted Answer

A) $ - 0 - 
B) $17,000 
C) $35,000 
D) $57,000 
E) $74,000 
A) $ - 0 - 
B) $17,000 
C) $35,000 
D) $57,000 
E) $74,000

Question 18

Roscoe receives real estate appraised at $200,000 and cash of $10,000 from Cathy in exchange for his investment realty with a basis of $170,000.Roscoe plans to hold the new realty for investment.What is his recognized gain?

Accepted Answer

A) $ - 0 - 
B) $10,000 
C) $20,000 
D) $30,000 
E) $40,000 
A) $ - 0 - 
B) $10,000 
C) $20,000 
D) $30,000 
E) $40,000

Question 19

Tony and Faith sell their home for $495,000,incurring selling expenses of $25,000.They purchased the residence for $85,000 and made capital improvements totaling $20,000 during the 20 years they lived there.What is their realized gain and recognized gain on the sale?
$\begin{array}{ccc} 
& \text { Realized } & \text { Recognized } \
\text { a. } & \$ 365,000 & \$-0- \
\text { b. } & \$ 365,000 & \$ 115,000 \
\text { c. } & \$ 385,000 & \$ 135,000 \
\text { d. } & \$ 385,000 & \$-0- \
\text { e. } & \$ 390,000 & \$-0-
\end{array}$

Accepted Answer

The answer of Tony and Faith sell their home for...

Question 20

Match each statement with the correct term below.
-Realized gain

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.

Which of the following qualifies as a like-kind exchange of property? I.Inventory for inventory. II.Office equipment for a delivery van.

No taxable gain or loss is recognized on a like-kind exchange of an investment asset for a similar asset that will be held for investment if both assets consist of

Classification of a nonrecognition transaction as a continuation of an investment requires a qualified replacement asset.

Which of the following qualifies as a like-kind exchange of property? I.Commercial retail building and its land for an office building and its land. II.Louisiana Oil,Inc.common stock for Louisiana Oil,Inc.corporate bonds.

Which of the following qualify as a like-kind exchange? -Farm land for an office building and its land.

Match each statement with the correct term below. -Third-party exchange

Which of the tax concept(s)allow for the deferral of gains on nonrecognition transactions? I.Capital Recovery Concept. II.Ability to Pay Concept.

An involuntary conversion occurs whenever a loss (but not a gain)is realized from a transaction that occurs against the taxpayer's will.

The basis of replacement property in a nonrecognition transaction is the adjusted basis of the property received less any deferred gain.

Roscoe receives real estate appraised at $200,000 and cash of $10,000 from Cathy in exchange for his investment realty with a basis of $170,000.Roscoe plans to hold the new realty for investment.What is his recognized gain?

Match each statement with the correct term below. -Realized gain

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 qualifies as a like-kind exchange of property? I.Inventory for inventory. II.Office equipment for a delivery van.

No taxable gain or loss is recognized on a like-kind exchange of an investment asset for a similar asset that will be held for investment if both assets consist of

Classification of a nonrecognition transaction as a continuation of an investment requires a qualified replacement asset.

Which of the following qualifies as a like-kind exchange of property? I.Commercial retail building and its land for an office building and its land. II.Louisiana Oil,Inc.common stock for Louisiana Oil,Inc.corporate bonds.

Which of the following qualify as a like-kind exchange? -Farm land for an office building and its land.

Match each statement with the correct term below. -Third-party exchange

Which of the tax concept(s)allow for the deferral of gains on nonrecognition transactions? I.Capital Recovery Concept. II.Ability to Pay Concept.

An involuntary conversion occurs whenever a loss (but not a gain)is realized from a transaction that occurs against the taxpayer's will.

The basis of replacement property in a nonrecognition transaction is the adjusted basis of the property received less any deferred gain.

Roscoe receives real estate appraised at $200,000 and cash of $10,000 from Cathy in exchange for his investment realty with a basis of $170,000.Roscoe plans to hold the new realty for investment.What is his recognized gain?

Match each statement with the correct term below. -Realized gain

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