Exam 11: Property Transactions: Nonrecognition of Gains and Losses

A barn, destroyed by fire, had a basis of $40,000. fte owner received $50,000 in insurance proceeds. fte barn was replaced by another barn costing $45,000. fte basis of the new barn is:

Paul and Paula Parker purchased a home in Washington, D.C. for $340,000 on November 4, 2011. Paul obtained a job in Roanoke, Virginia, and on December 4, 2012, the Parkers sold their home in Washington for $570,000. (a.) How much gain can the Parkers exclude and how much is recognized? (b.) Assume that the Parkers instead sold their home on December 4, 2012, for $760,000.

It is possible for both parties to receive boot in a like-kind exchange if one party receives cash and the other party is treated as having received boot by having been released from more debt than it assumed on the exchange.

fte exchange of a warehouse for a printing press is a nontaxable like-kind exchange of property.

Norman Nunn had purchased his residence on January 12, 2011, for $155,000 and then sold it on April 12, 2012 for $475,000 because of illness. How much gain must Norman recognize?

A like-kind exchange would occur when a business trades in a truck as a part of the consideration in the purchase of a new truck.

Which of the following statements are correct? (1.) A sale is generally a transfer of property for money only or for a promise to pay money. (2.) An exchange is a transfer of property in return for other property or services. (3)) Recognized gain is always the excess of the amount realized over the adjusted basis of the property. (4.) Realized loss is always the excess of the adjusted basis of the property over the amount realized. (5)) fte adjusted basis of the property is always the original cost adjusted for such items as casualty losses, improvements, and depreciation.e.g., in the case of inherited property or property received by gift.

A warehouse used by Dirk Dumont in his business was condemned by the state. fte fair market value of the warehouse was $300,000; however, the state only awarded Dirk $250,000. Dirk's adjusted basis in the warehouse was $100,000. Dirk spent $75,000 to renovate an old barn that he owned in order to convert it to a warehouse, and he also purchased a new warehouse for $125,000. Both warehouses will be used to house the equipment previously held in the state condemned warehouse. What amount should Dirk report as gain or loss on the condemnation if an election is made under Code Sec. 1033?

Loss from the sale of a personal residence is never recognized but gain from the sale of a personal residence may be recognized.

Steve Stromm transfers an office building with an adjusted basis of $200,000 and a fair market value of $300,000 for Andrew Astor's office building (adjusted basis $190,000) with a fair market value of $250,000. Steve's mortgage of $120,000 is assumed by Andrew whose mortgage of $70,000 is assumed by Steve. What is the realized and recognized gain or loss for Steve and Andrew and what are their bases in their acquired buildings?

Jake Jacobson sold his personal residence on June 15, 2012, which he had purchased a year earlier, in order to accept a position at a new college 500 miles further away. Jake may not exclude any gain on the sale since he did not live in the residence for at least two years.

Real property where Paul Peterson's warehouse is located is condemned by the state government on November 23, 2012. Paul's adjusted basis in the warehouse is $420,000. He receives its $1 million condemnation award from the state on March 5, 2013. What is the latest date that Paul can purchase qualified replacement property and be able to defer the entire $580,000 realized gain from the condemnation?

Gloria Gates sold the building in which she operated her business. Gloria had acquired the property many years ago for $150,000 and over this period had made major improvements costing $180,000. Gloria had claimed $60,000 in straight-line depreciation at the time of the sale. fte selling expenses paid by Gloria amounted to $40,000. Bill purchased the property by (1) giving Gloria $170,000 in cash; (2) giving Gloria unlike property with a fair market value of $180,000; (3) assuming Gloria's mortgage on the property of $140,000; and (4) paying a delinquent real estate tax bill on the property of $50,000. What is Gloria's gain on the sale?

John Jobs is a successful building contractor who constructs and occupies a new home approximately once every two or three years. Given he is married and satisfies the various requirements, he may exclude up to $500,000 in gain on such sales once every two years.

If Peter in the preceding problem had received proceeds of $550,000. How much gain would be recognized?

Unimproved land can be exchanged for an apartment house and qualify as a like-kind exchange.

Dexter Davenport had an adjusted basis of $230,000 in real estate which he held for investment. He exchanged it for other real estate to be held for investment with a fair market value of $210,000, a boat with a fair market value of $45,000 and $15,000 cash. What is Dexter's basis in the real estate and the boat received?

Winston White exchanged business real estate that had an adjusted basis of $16,000 for other business real estate with a fair market value of $15,000 and $4,000 cash. What is Winston's basis in the property received?

fte exchange of a personal residence for land qualifies as a nontaxable exchange.

Assume that the Colemans in the preceding problem instead sold their home on December 1, 2012, for $800,000. How much gain must the Colemans recognize?