Question 1

Capital recoveries include:

Accepted Answer

A) The cost of capital improvements. 
B) Ordinary repair and maintenance expenditures. 
C) Payments made on the principal of a mortgage on taxpayer's building. 
D) Amortization of bond premium. 
E) All of the above. 
A) The cost of capital improvements. 
B) Ordinary repair and maintenance expenditures. 
C) Payments made on the principal of a mortgage on taxpayer's building. 
D) Amortization of bond premium. 
E) All of the above.

Question 2

Abby sells real property for $300,000.The buyer pays $5,000 in property taxes that had accrued during the year while the property was still legally owned by Abby.In addition, Abby pays $15,000 in commissions and $3,000 in legal fees in connection with the sale.How much does Abby realize (the amount realized) from the sale of her property?

Accepted Answer

A) $277,000 
B) $282,000 
C) $287,000 
D) $300,000 
E) None of the above 
A) $277,000 
B) $282,000 
C) $287,000 
D) $300,000 
E) None of the above

Question 3

As part of the divorce agreement, Tyler transfers his ownership interest in their personal residence to Lupe.The house had been jointly owned by Tyler and Lupe and the adjusted basis is $520,000.At the time of the transfer to Lupe, the fair market value is $800,000.What is the recognized gain to Tyler, and what is Lupe's basis for the house?

Accepted Answer

A) $0 and $520,000. 
B) $0 and $800,000. 
C) $140,000 and $520,000. 
D) $280,000 and $800,000. 
E) None of the above. 
A) $0 and $520,000. 
B) $0 and $800,000. 
C) $140,000 and $520,000. 
D) $280,000 and $800,000. 
E) None of the above.

Question 4

Stuart owns land with an adjusted basis of $190,000 and a fair market value of $500,000.If the property is going to be given to Stuart's nephew, Alex, it is preferable for the transfer to be by inheritance rather than by gift.

Accepted Answer

A) True 
 B)False

Question 5

Dennis, a calendar year taxpayer, owns a warehouse (adjusted basis of $190,000) which is destroyed by a tornado in October 2017.He receives insurance proceeds of $250,000 in January 2018.If before 2021, Dennis replaces the warehouse with another warehouse costing at least $250,000, he can elect to postpone the recognition of any realized gain.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following statements is correct for a § 1033 involuntary conversion of an office building which is destroyed by fire?

Accepted Answer

A) An election can be made to postpone gain on a § 1033 involuntary conversion only if the proceeds received are reinvested in qualifying property no later than two years after the end of the tax year in which a proceeds inflow is received that is large enough to produce a realized gain. 
B) The postponement of realized gain in a § 1033 involuntary conversion is elective. 
C) The functional use test is satisfied if a business warehouse is replaced with another business warehouse. 
D) The taxpayer use test is satisfied if a shopping mall rented to tenants is replaced with an office building to be rented to tenants. 
E) All of the above are correct. 
A) An election can be made to postpone gain on a § 1033 involuntary conversion only if the proceeds received are reinvested in qualifying property no later than two years after the end of the tax year in which a proceeds inflow is received that is large enough to produce a realized gain. 
B) The postponement of realized gain in a § 1033 involuntary conversion is elective. 
C) The functional use test is satisfied if a business warehouse is replaced with another business warehouse. 
D) The taxpayer use test is satisfied if a shopping mall rented to tenants is replaced with an office building to be rented to tenants. 
E) All of the above are correct.

Question 7

What is the general formula for calculating the adjusted basis of property?

Accepted Answer

Adjusted basis is determined a

Question 8

Lola owns land as an investor.She exchanges the land for a warehouse which she leases to a tenant who uses it to store his business inventory.The exchange does qualify for like-kind exchange treatment.

Accepted Answer

A) True 
 B)False

Question 9

If boot is received in a § 1031 like-kind exchange, the recognized gain cannot exceed the realized gain.

Accepted Answer

A) True 
 B)False

Question 10

Maurice sells his personal use automobile at a realized loss.Under what circumstances can Maurice deduct the loss? What if the personal use asset was sold at a realized gain?

Accepted Answer

Under no circumstance can Maurice recogn

Question 11

Matt, who is single, sells his principal residence, which he has owned and occupied for 5 years, for $435,000.The adjusted basis is $140,000 and the selling expenses are $20,000.Three days after the sale he purchases another residence for $385,000.Matt's recognized gain is $25,000 and his basis for the new residence is $385,000.

Accepted Answer

A) True 
 B)False

Question 12

What effect does a deductible casualty loss have on the adjusted basis of property?

Accepted Answer

A deductible casualt

Question 13

Lump-sum purchases of land and a building are allocated on the basis of the relative fair market values of the individual assets acquired.

Accepted Answer

A) True 
 B)False

Question 14

Realized gain or loss is measured by the difference between the amount realized from the sale or other disposition of property and the property's adjusted basis at the date of disposition.

Accepted Answer

A) True 
 B)False

Question 15

In addition to other gifts, Megan made a gift of stock to Jeri in 1976.Megan had purchased the stock in 1974 for $7,500.At the time of the gift, the stock was worth $20,000.If Megan paid $850 of gift tax on the transaction in 1976, what is Jeri's gain basis for the stock?

Accepted Answer

A) $7,500 
B) $8,350 
C) $9,017 
D) $20,000 
E) None of the above 
A) $7,500 
B) $8,350 
C) $9,017 
D) $20,000 
E) None of the above

Question 16

Evelyn's office building is destroyed by fire on July 12, 2017.The adjusted basis is $315,000.She receives insurance proceeds of $350,000 on August 31, 2017.Calculate the amount that Evelyn must reinvest in qualifying property in order that her recognized gain be $20,000.Assume she elects § 1033 (nonrecognition of gain from an involuntary conversion) postponement treatment.

Accepted Answer

None

Question 17

In a nontaxable exchange, the replacement property is assigned a carryover basis if there is a realized gain, but receives a new basis if there is a realized loss.

Accepted Answer

A) True 
 B)False

Question 18

A taxpayer whose principal residence is destroyed in a fire can use both the § 121 (sale of residence gain exclusion) and the § 1033 (involuntary conversion postponement of gain) provisions.

Accepted Answer

A) True 
 B)False

Question 19

The amount realized does not include any amount received by the taxpayer that is designated as severance damages by both the government and the taxpayer.

Accepted Answer

A) True 
 B)False

Question 20

If losses are disallowed in a related party transaction, the holding period for the buyer includes the holding period of the seller.

Accepted Answer

A) True 
 B)False

Capital recoveries include:

Stuart owns land with an adjusted basis of $190,000 and a fair market value of $500,000.If the property is going to be given to Stuart's nephew, Alex, it is preferable for the transfer to be by inheritance rather than by gift.

Which of the following statements is correct for a § 1033 involuntary conversion of an office building which is destroyed by fire?

What is the general formula for calculating the adjusted basis of property?

Lola owns land as an investor.She exchanges the land for a warehouse which she leases to a tenant who uses it to store his business inventory.The exchange does qualify for like-kind exchange treatment.

If boot is received in a § 1031 like-kind exchange, the recognized gain cannot exceed the realized gain.

Maurice sells his personal use automobile at a realized loss.Under what circumstances can Maurice deduct the loss? What if the personal use asset was sold at a realized gain?

What effect does a deductible casualty loss have on the adjusted basis of property?

Lump-sum purchases of land and a building are allocated on the basis of the relative fair market values of the individual assets acquired.

Realized gain or loss is measured by the difference between the amount realized from the sale or other disposition of property and the property's adjusted basis at the date of disposition.

In addition to other gifts, Megan made a gift of stock to Jeri in 1976.Megan had purchased the stock in 1974 for $7,500.At the time of the gift, the stock was worth $20,000.If Megan paid $850 of gift tax on the transaction in 1976, what is Jeri's gain basis for the stock?

In a nontaxable exchange, the replacement property is assigned a carryover basis if there is a realized gain, but receives a new basis if there is a realized loss.

A taxpayer whose principal residence is destroyed in a fire can use both the § 121 (sale of residence gain exclusion) and the § 1033 (involuntary conversion postponement of gain) provisions.

The amount realized does not include any amount received by the taxpayer that is designated as severance damages by both the government and the taxpayer.

If losses are disallowed in a related party transaction, the holding period for the buyer includes the holding period of the seller.

Introduction to Taxation

Working With the Tax Law

Taxation on the Financial Statements

Gross Income

Business Deductions

Losses and Loss Limitations

Capital Gains and Losses

Individuals As the Taxpayers

Income, Deductions and Credits

Individuals As Employees and Proprietors

Organization, Capital Structure, and Operating Rules

Earnings Profits and Distributions

Partnerships and Limited Liability Entities

S Corporations

Multi-Juris-Dictional Taxation

Tax Credits and Corporate Alternative Minimum Tax

Comparative Forms of Doing Business

Filters

Exam 7: Basis, Gain and Loss, and Nontaxable Exchanges

Capital recoveries include:

Stuart owns land with an adjusted basis of $190,000 and a fair market value of $500,000.If the property is going to be given to Stuart's nephew, Alex, it is preferable for the transfer to be by inheritance rather than by gift.

Which of the following statements is correct for a § 1033 involuntary conversion of an office building which is destroyed by fire?

What is the general formula for calculating the adjusted basis of property?

Lola owns land as an investor.She exchanges the land for a warehouse which she leases to a tenant who uses it to store his business inventory.The exchange does qualify for like-kind exchange treatment.

If boot is received in a § 1031 like-kind exchange, the recognized gain cannot exceed the realized gain.

Maurice sells his personal use automobile at a realized loss.Under what circumstances can Maurice deduct the loss? What if the personal use asset was sold at a realized gain?

What effect does a deductible casualty loss have on the adjusted basis of property?

Lump-sum purchases of land and a building are allocated on the basis of the relative fair market values of the individual assets acquired.

Realized gain or loss is measured by the difference between the amount realized from the sale or other disposition of property and the property's adjusted basis at the date of disposition.

In addition to other gifts, Megan made a gift of stock to Jeri in 1976.Megan had purchased the stock in 1974 for $7,500.At the time of the gift, the stock was worth $20,000.If Megan paid $850 of gift tax on the transaction in 1976, what is Jeri's gain basis for the stock?

In a nontaxable exchange, the replacement property is assigned a carryover basis if there is a realized gain, but receives a new basis if there is a realized loss.

A taxpayer whose principal residence is destroyed in a fire can use both the § 121 (sale of residence gain exclusion) and the § 1033 (involuntary conversion postponement of gain) provisions.

The amount realized does not include any amount received by the taxpayer that is designated as severance damages by both the government and the taxpayer.

If losses are disallowed in a related party transaction, the holding period for the buyer includes the holding period of the seller.

Introduction to Taxation

Working With the Tax Law

Taxation on the Financial Statements

Gross Income

Business Deductions

Losses and Loss Limitations

Capital Gains and Losses

Individuals As the Taxpayers

Income, Deductions and Credits

Individuals As Employees and Proprietors

Organization, Capital Structure, and Operating Rules

Earnings Profits and Distributions

Partnerships and Limited Liability Entities

S Corporations

Multi-Juris-Dictional Taxation

Tax Credits and Corporate Alternative Minimum Tax

Comparative Forms of Doing Business

Filters