Question 1

The holding period for property acquired by gift is automatically long term.

Accepted Answer

A) True 
 B)False

Question 2

A taxpayer who has purchased several lots of stock on different dates at different purchase prices and cannot identify the lot of stock that is being sold should use either a weighted average approach or a LIFO approach.

Accepted Answer

A) True 
 B)False

Question 3

Chaney exchanges land used in her business for another parcel of land. The adjusted basis for her land is $32,000.
The land she will receive has a fair market value of $33,000. In addition, Chaney receives cash of $4,000.
a. Calculate Chaney's realized and recognized gain or loss.
b. Calculate Chaney's basis for the assets she received.

Accepted Answer

None

Question 4

If a husband inherits his deceased wife's share of jointly owned property in a common law state, both the husband's original share and the share inherited from the deceased wife are stepped-up or down to the fair market value at the date of the wife's death.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following satisfy the time period requirement for postponement of gain as a § 1033 (nonrecognition of gain from an involuntary conversion) involuntary conversion?

Accepted Answer

A)  Al's business warehouse is destroyed by a tornado on October 31, 2019. Al is a calendar year taxpayer. He receives insurance proceeds on December 5, 2019. He reinvests the proceeds in another warehouse to be used in his business on December 29, 2021. 
B)  Heather's personal residence is destroyed by fire on October 31, 2019. She is a calendar year taxpayer. She receives insurance proceeds on December 5, 2019. She purchases another principal residence with the proceeds on October 31, 2021. 
C)  Mack's office building is condemned by the city as part of a road construction project. The date of the condemnation is October 31, 2019. He is a calendar year taxpayer. He receives condemnation proceeds from the city on that date. He purchases another office building with the proceeds on December 5, 2022. 
D)  Shannon's business automobile is destroyed in an accident on October 31, 2019. Shannon is a fiscal year taxpayer with the fiscal year ending on June 30th. She receives insurance proceeds on December 5, 2019. She purchases another business automobile with the proceeds on June 1, 2022. 
E)  All of these. 
A)  Al's business warehouse is destroyed by a tornado on October 31, 2019. Al is a calendar year taxpayer. He receives insurance proceeds on December 5, 2019. He reinvests the proceeds in another warehouse to be used in his business on December 29, 2021. 
B)  Heather's personal residence is destroyed by fire on October 31, 2019. She is a calendar year taxpayer. She receives insurance proceeds on December 5, 2019. She purchases another principal residence with the proceeds on October 31, 2021. 
C)  Mack's office building is condemned by the city as part of a road construction project. The date of the condemnation is October 31, 2019. He is a calendar year taxpayer. He receives condemnation proceeds from the city on that date. He purchases another office building with the proceeds on December 5, 2022. 
D)  Shannon's business automobile is destroyed in an accident on October 31, 2019. Shannon is a fiscal year taxpayer with the fiscal year ending on June 30th. She receives insurance proceeds on December 5, 2019. She purchases another business automobile with the proceeds on June 1, 2022. 
E)  All of these.

Question 6

During 2019, Jack and Tonya, a married couple, decided to sell their residence. The residence has a basis of $162,000 and has been owned and occupied by them for 11 years. The house was sold in May for $395,000 with broker's commissions and other selling expenses being $24,000. They purchased a new residence in June for
$400,000. What is the adjusted basis of the new residence?

Accepted Answer

A)  $0 
B)  $141,000 
C)  $162,000 
D)  $191,000 
E)  None of these 
A)  $0 
B)  $141,000 
C)  $162,000 
D)  $191,000 
E)  None of these

Question 7

Valarie purchases a rental house and land for $180,000 during a depressed real estate market. Appraisals place the value of the house at $140,000 and the land at $60,000 (a total of $200,000). What is Valarie's basis in the house?

Accepted Answer

A)  $126,000. 
B)  $140,000. 
C)  $180,000. 
D)  $200,000. 
A)  $126,000. 
B)  $140,000. 
C)  $180,000. 
D)  $200,000.

Question 8

Monica sells a parcel of land to her son, Elbert, for $90,000. Monica's adjusted basis is $100,000. Three years later, Elbert gives the land to his fiancée, Karen. At that date, the land is worth $104,000. No gift tax is paid. Since Elbert is going to be stationed in the U.S. Army in Germany for three years, they do not plan to be married until his tour is completed. Six months after receiving the land, Karen sells it for $110,000. At the same time, Karen sends Elbert a "Dear John" e-mail. Calculate Karen's realized and recognized gain or loss.

Accepted Answer

Elbert's adjusted basis for the land is

Question 9

Molly exchanges land (adjusted basis of $85,000; fair market value of $78,000) used in her business and common stock held for investment (adjusted basis of $10,000; fair market value of $15,000) for a single parcel of land (fair market value of $93,000) to be used in her business in a like-kind exchange. What is Molly's recognized gain or loss?

Accepted Answer

A)  $0 
B)  $5,000 
C)  ($2,000) 
D)  ($7,000) 
A)  $0 
B)  $5,000 
C)  ($2,000) 
D)  ($7,000)

Question 10

Joseph converts a building (adjusted basis of $50,000 and fair market value of $40,000) from personal use to business use. Justin receives a building with a $40,000 fair market value ($50,000 donor's adjusted basis) from his mother as a gift. Discuss the tax consequences with respect to Joseph's and Justin's adjusted basis.

Accepted Answer

Upon conversion from personal use to bus

Question 11

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 12

The amount of the loss basis of a gift will differ from the amount of the gain basis only if at the date of the gift the adjusted basis of the property exceeds the property's fair market value.

Accepted Answer

A) True 
 B)False

Question 13

Mary sells her personal use automobile for $20,000. She purchased the car two years ago for $17,000. What is Mary's recognized gain or loss? It increased in value due to its excellent mileage plus a safe design.

Accepted Answer

A)  $0 
B)  $3,000 
C)  $17,000 
D)  $20,000 
A)  $0 
B)  $3,000 
C)  $17,000 
D)  $20,000

Question 14

Parker bought a brand new Ferrari on January 1, 2019, for $125,000. Parker was fatally injured in an auto accident on June 23, 2019, when the fair market value of the car was $105,000. Parker was driving a loaner car from the Ferrari dealership while his car was being serviced. In his will, Parker left the Ferrari to his best friend, Ryan. Ryan's holding period for the Ferrari begins on January 1, 2019.

Accepted Answer

A) True 
 B)False

Question 15

The basis of personal use property converted to business use is:

Accepted Answer

A)  Always the lower of its adjusted basis or fair market value on the date of conversion. 
B)  Always its adjusted basis on the date of conversion. 
C)  Always its fair market value on the date of conversion. 
D)  Always the higher of its adjusted basis or fair market value on the date of conversion. 
E)  None of these. 
A)  Always the lower of its adjusted basis or fair market value on the date of conversion. 
B)  Always its adjusted basis on the date of conversion. 
C)  Always its fair market value on the date of conversion. 
D)  Always the higher of its adjusted basis or fair market value on the date of conversion. 
E)  None of these.

Question 16

If the amount of a corporate distribution is less than the amount of the corporate earnings and profits, the return of capital concept does not apply and the shareholders' adjusted basis for the stock remains unchanged.

Accepted Answer

A) True 
 B)False

Question 17

What kinds of property do not qualify under the like-kind provisions?

Accepted Answer

The property exchanged may not qualify f

Question 18

Brian and Becca have been married and living together in Brian's home for 6 years. He lived in the home alone for 20 years prior to their marriage. They sell the home, which has an adjusted basis of $120,000, for $700,000. Brian and Becca plan to use the § 121 exclusion (exclusion of gain on sale of principal residence). In Becca's prior marriage to Dan, Dan sold his principal residence and used the § 121 exclusion. Becca and Dan filed joint returns during their seven years of marriage. They had lived in Dan's house throughout their marriage. Dan's sale had occurred one year prior to the divorce. Brian and Becca purchase a replacement residence for $650,000 one month after the sale of their home. What is the recognized gain and basis for the new home?

Accepted Answer

A)  $0; $80,000. 
B)  $80,000; $150,000. 
C)  $80,000; $650,000. 
D)  $330,000; $650,000. 
A)  $0; $80,000. 
B)  $80,000; $150,000. 
C)  $80,000; $650,000. 
D)  $330,000; $650,000.

Question 19

The adjusted basis of an asset is the original cost (or basis) plus capital recoveries less capital additions.

Accepted Answer

A) True 
 B)False

Question 20

Deidra has owned and occupied her principal residence for 10 years. Two and one-half years ago, she married Doug who moved into her house. Doug has never owned a home. When Deidra is transferred to another city, she sells the house and has a realized gain of $425,000. Deidra can exclude the realized gain of $425,000 from her gross income under § 121 if she and Doug file a joint return.

Accepted Answer

A) True 
 B)False

The holding period for property acquired by gift is automatically long term.

A taxpayer who has purchased several lots of stock on different dates at different purchase prices and cannot identify the lot of stock that is being sold should use either a weighted average approach or a LIFO approach.

If a husband inherits his deceased wife's share of jointly owned property in a common law state, both the husband's original share and the share inherited from the deceased wife are stepped-up or down to the fair market value at the date of the wife's death.

Which of the following satisfy the time period requirement for postponement of gain as a § 1033 (nonrecognition of gain from an involuntary conversion) involuntary conversion?

Valarie purchases a rental house and land for $180,000 during a depressed real estate market. Appraisals place the value of the house at $140,000 and the land at $60,000 (a total of $200,000). What is Valarie's basis in the house?

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.

The amount of the loss basis of a gift will differ from the amount of the gain basis only if at the date of the gift the adjusted basis of the property exceeds the property's fair market value.

Mary sells her personal use automobile for $20,000. She purchased the car two years ago for $17,000. What is Mary's recognized gain or loss? It increased in value due to its excellent mileage plus a safe design.

The basis of personal use property converted to business use is:

If the amount of a corporate distribution is less than the amount of the corporate earnings and profits, the return of capital concept does not apply and the shareholders' adjusted basis for the stock remains unchanged.

What kinds of property do not qualify under the like-kind provisions?

The adjusted basis of an asset is the original cost (or basis) plus capital recoveries less capital additions.

Understanding and Working With the Federal Tax Law

Working With the Tax Law

Computing the Tax

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, Cost Recovery, Amortization, and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payments

Property Transactions: Capital Gains and Losses, Section 1231, and Recapture Provisions

Taxing Business Income

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Corporations: Distributions in Complete Liquidation and an Overview of Reorganizations

Partnerships

S Corporations

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Income Taxation of Trusts and Estates

Filters

Exam 13: Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges

The holding period for property acquired by gift is automatically long term.

A taxpayer who has purchased several lots of stock on different dates at different purchase prices and cannot identify the lot of stock that is being sold should use either a weighted average approach or a LIFO approach.

If a husband inherits his deceased wife's share of jointly owned property in a common law state, both the husband's original share and the share inherited from the deceased wife are stepped-up or down to the fair market value at the date of the wife's death.

Which of the following satisfy the time period requirement for postponement of gain as a § 1033 (nonrecognition of gain from an involuntary conversion) involuntary conversion?

Valarie purchases a rental house and land for $180,000 during a depressed real estate market. Appraisals place the value of the house at $140,000 and the land at $60,000 (a total of $200,000). What is Valarie's basis in the house?

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.

The amount of the loss basis of a gift will differ from the amount of the gain basis only if at the date of the gift the adjusted basis of the property exceeds the property's fair market value.

Mary sells her personal use automobile for $20,000. She purchased the car two years ago for $17,000. What is Mary's recognized gain or loss? It increased in value due to its excellent mileage plus a safe design.

The basis of personal use property converted to business use is:

If the amount of a corporate distribution is less than the amount of the corporate earnings and profits, the return of capital concept does not apply and the shareholders' adjusted basis for the stock remains unchanged.

What kinds of property do not qualify under the like-kind provisions?

The adjusted basis of an asset is the original cost (or basis) plus capital recoveries less capital additions.

Understanding and Working With the Federal Tax Law

Working With the Tax Law

Computing the Tax

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, Cost Recovery, Amortization, and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payments

Property Transactions: Capital Gains and Losses, Section 1231, and Recapture Provisions

Taxing Business Income

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Corporations: Distributions in Complete Liquidation and an Overview of Reorganizations

Partnerships

S Corporations

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Income Taxation of Trusts and Estates

Filters