Question 1

The ownership test for the sale of a personal residence states:

Accepted Answer

A) That a taxpayer must have owned the home for at least two years. 
B) That a taxpayer must have lived in the home for at least two years. 
C) That a taxpayer be the original owner of the residence. 
D) None of these. 
A) That a taxpayer must have owned the home for at least two years. 
B) That a taxpayer must have lived in the home for at least two years. 
C) That a taxpayer be the original owner of the residence. 
D) None of these.

Question 2

Raymond exchanges a rental lake house with an adjusted basis of $200,000 and fair market value of $320,000 for a rental beach house with a fair market value of $290,000 and $30,000 cash.What are the recognized gain or loss and the basis of the beach house?

Accepted Answer

A) $0 gain and $230,000 basis. 
B) $30,000 gain and $200,000 basis. 
C) $30,000 gain and $230,000 basis. 
D) $120,000 gain and $320,000 basis. 
A) $0 gain and $230,000 basis. 
B) $30,000 gain and $200,000 basis. 
C) $30,000 gain and $230,000 basis. 
D) $120,000 gain and $320,000 basis.

Question 3

Sanjay exchanges a warehouse he uses in his rental business for a building owned by Sidney which he will use in his rental business.The adjusted basis of Sanjay's building is $320,000 and the fair market value is $500,000.The adjusted basis of Sidney's warehouse is $160,000 and the fair market value is $500,000.Which of the following statements is correct?

Accepted Answer

A) Sanjay's recognized gain is $0 and his basis for the warehouse received is $500,000. 
B) Sanjay's recognized gain is $180,000 and his basis for the warehouse received is $320,000. 
C) Sanjay's recognized gain is $0 and his basis for the warehouse received is $320,000. 
D) Sanjay's recognized gain is $180,000 and his basis for the warehouse received is $500,000. 
A) Sanjay's recognized gain is $0 and his basis for the warehouse received is $500,000. 
B) Sanjay's recognized gain is $180,000 and his basis for the warehouse received is $320,000. 
C) Sanjay's recognized gain is $0 and his basis for the warehouse received is $320,000. 
D) Sanjay's recognized gain is $180,000 and his basis for the warehouse received is $500,000.

Question 4

The election to defer a gain under the involuntary conversion rules is reported on:

Accepted Answer

A) Form 4797. 
B) Form 1040,Schedule A. 
C) Form 1040,Schedule D. 
D) No form is used.An election is attached to the tax return. 
A) Form 4797. 
B) Form 1040,Schedule A. 
C) Form 1040,Schedule D. 
D) No form is used.An election is attached to the tax return.

Question 5

If a taxpayer excludes the gain on the sale of his personal residence and,within two years,sells a second residence,he or she can exclude (up to $250,000 for a single taxpayer):

Accepted Answer

A) The entire gain on the second sale if the sale is due to health,employment reasons or unforeseen circumstances. 
B) The entire gain for any reason. 
C) A ratio of the days owned divided by 730 days and only if the sale is due to health,employment reasons or unforeseen circumstances. 
D) A ratio of the days owned divided by 730 days for any reason. 
A) The entire gain on the second sale if the sale is due to health,employment reasons or unforeseen circumstances. 
B) The entire gain for any reason. 
C) A ratio of the days owned divided by 730 days and only if the sale is due to health,employment reasons or unforeseen circumstances. 
D) A ratio of the days owned divided by 730 days for any reason.

Question 6

Jane and Jason (married taxpayers)sell their personal residence in 2017.In order to exclude the maximum gain allowed for married couples on the sale of the residence,they must:

Accepted Answer

A) Have owned the home for at least two years. 
B) Lived in the home as their main residence for a least two years. 
C) Not have sold another primary residence in the last two years. 
D) All of these. 
A) Have owned the home for at least two years. 
B) Lived in the home as their main residence for a least two years. 
C) Not have sold another primary residence in the last two years. 
D) All of these.

Question 7

Related parties include the taxpayer's spouse,ancestors,lineal descendants,but not brothers and sisters.

Accepted Answer

A) True 
 B)False

Question 8

Laverne exchanges a rental beach house with an adjusted basis of $400,000 and fair market value of $320,000 for a mini-storage building with a fair market value of $200,000 plus $120,000 cash.What is the recognized gain or loss on the exchange and the basis of the mini-storage building?

Accepted Answer

Since the assets are not like-kind,the l

Question 9

The gross profit percentage is typically the gross profit divided by the contract price.

Accepted Answer

A) True 
 B)False

Question 10

A barn with an adjusted basis of $125,000 was destroyed by a tornado on March 5,2017.On May 15,2017,the insurance company paid the owner $150,000.The owner reinvested $170,000 in another barn.What is the basis of the new barn if non-recognition of gain from an involuntary conversion is elected?

Accepted Answer

A) $0. 
B) $120,000. 
C) $145,000. 
D) $170,000. 
A) $0. 
B) $120,000. 
C) $145,000. 
D) $170,000.

Question 11

Taxpayers are required to use the installment method for deferred payments unless the taxpayer elects not to use the installment method.

Accepted Answer

A) True 
 B)False

Question 12

The state condemned Cassidy's land on November 25,2017.The land has a $400,000 basis.Cassidy received insurance proceeds of $610,000 on January 27,2018.Cassidy has until what date to defer the gain under the involuntary conversion rules?

Accepted Answer

A) December 31,2021. 
B) December 31,2019. 
C) November 25,2019. 
D) December 31,2020. 
A) December 31,2021. 
B) December 31,2019. 
C) November 25,2019. 
D) December 31,2020.

Question 13

Knox operated a business which was damaged by a hurricane.His losses were as follows:
 $\begin{array}{rrrrrrr}&&&&\text { Insurance }\
\text { Asset } & \text { Basis } & \text { FMV Before } & \text { FMV After } &\text { Proceeds }\
1 & \$ 3,000 & \$ 6,000 & \$ 0& 5,000 \
2 & 45,000 & 65,000 &  0 & 75,000 \
3 & 7,200 & 15,000 &  0 & 0
\end{array}$ a.What is Knox's net casualty loss (if any)assuming his AGI is $85,000 prior to the deduction? Assume he properly replaced all assets.
b.What is his basis in replacement Asset 1 purchased for $8,000 assuming Knox elected the non-recognition of gain from an involuntary conversion?

Accepted Answer

a.$7,200 business casualty loss.The invo

Question 14

The City of Greenville condemned 300 acres of Kayla's farmland.Kayla's land was worth $250,000 and her basis was $62,500.In payment to Kayla,the city gave Kayla 500 acres of similar land.An appraisal indicated that the land Kayla received was worth $265,000.What is Kayla's recognized gain or loss on the involuntary conversion and what is her basis in the land received?

Accepted Answer

A) $0 gain and $62,500 basis. 
B) $0 gain and $262,500 basis. 
C) $15,000 gain and $265,000 basis. 
D) $202,500 gain and $265,000 basis. 
A) $0 gain and $62,500 basis. 
B) $0 gain and $262,500 basis. 
C) $15,000 gain and $265,000 basis. 
D) $202,500 gain and $265,000 basis.

Question 15

Tanner,who is single,purchased a house on April 15,2003 for $215,000.During the time Tanner owned the house,he installed a swimming pool at a cost of $21,000 and replaced the deck at a cost of $18,000.On August 5,2017,Tanner sold the house for $570,000.Tanner paid a sales commission of $30,000 and legal fees of $800 connected with the sale of the house.What is Tanner's recognized gain on the sale of the house?

Accepted Answer

A) $0. 
B) $35,200. 
C) $250,000. 
D) $285,200. 
A) $0. 
B) $35,200. 
C) $250,000. 
D) $285,200.

Question 16

Raymond and Susan are married and 55 years old.They sell their personal residence for $850,000 cash.They purchased the house fifteen years ago for $200,000.What is the amount of gain that Raymond and Susan should recognize on the sale?

Accepted Answer

A) $0. 
B) $150,000. 
C) $500,000. 
D) $650,000. 
A) $0. 
B) $150,000. 
C) $500,000. 
D) $650,000.

Question 17

Basil,who is single,purchased a house on May 10,1984,for $175,000.During the years Basil owned the house,he installed a pool at a cost of $20,000 and built a new garage at a cost of $20,000.On October 12,2017,Basil sold the house for $518,000.Basil paid a sales commission of $24,600 and legal fees of $400 connected with the sale of the house.What is Basil's recognized gain on the sale of the house?

Accepted Answer

$28,000 gain recognized.
The r

Question 18

Matt and Opal were married in April of 2017.Matt has lived in his personal residence for fifteen years and Opal moved into the house after the marriage.Matt died in October 2017.Opal sold the house at a $300,000 gain in December,2017.How much of the gain can Opal exclude?

Accepted Answer

A) $0. 
B) $250,000. 
C) $300,000. 
D) None of these. 
A) $0. 
B) $250,000. 
C) $300,000. 
D) None of these.

Question 19

A wash sale occurs when a taxpayer sells stock or securities at a loss and,within a period of 60 days before or 60 days after the sale,the taxpayer acquires substantially identical stock or securities.

Accepted Answer

A) True 
 B)False

Question 20

The exclusion of gain on the sale of a residence applies to only one sale every two years.The taxpayer is always ineligible for the exclusion if,during the two-year period ending on the date of sale of the present home,the taxpayer sold another home at a gain and excluded all or part of that gain no matter the reason for the sale.

Accepted Answer

A) True 
 B)False

The ownership test for the sale of a personal residence states:

Raymond exchanges a rental lake house with an adjusted basis of $200,000 and fair market value of $320,000 for a rental beach house with a fair market value of $290,000 and $30,000 cash.What are the recognized gain or loss and the basis of the beach house?

The election to defer a gain under the involuntary conversion rules is reported on:

If a taxpayer excludes the gain on the sale of his personal residence and,within two years,sells a second residence,he or she can exclude (up to $250,000 for a single taxpayer):

Jane and Jason (married taxpayers)sell their personal residence in 2017.In order to exclude the maximum gain allowed for married couples on the sale of the residence,they must:

Related parties include the taxpayer's spouse,ancestors,lineal descendants,but not brothers and sisters.

Laverne exchanges a rental beach house with an adjusted basis of $400,000 and fair market value of $320,000 for a mini-storage building with a fair market value of $200,000 plus $120,000 cash.What is the recognized gain or loss on the exchange and the basis of the mini-storage building?

The gross profit percentage is typically the gross profit divided by the contract price.

A barn with an adjusted basis of $125,000 was destroyed by a tornado on March 5,2017.On May 15,2017,the insurance company paid the owner $150,000.The owner reinvested $170,000 in another barn.What is the basis of the new barn if non-recognition of gain from an involuntary conversion is elected?

Taxpayers are required to use the installment method for deferred payments unless the taxpayer elects not to use the installment method.

The state condemned Cassidy's land on November 25,2017.The land has a $400,000 basis.Cassidy received insurance proceeds of $610,000 on January 27,2018.Cassidy has until what date to defer the gain under the involuntary conversion rules?

Raymond and Susan are married and 55 years old.They sell their personal residence for $850,000 cash.They purchased the house fifteen years ago for $200,000.What is the amount of gain that Raymond and Susan should recognize on the sale?

Matt and Opal were married in April of 2017.Matt has lived in his personal residence for fifteen years and Opal moved into the house after the marriage.Matt died in October 2017.Opal sold the house at a $300,000 gain in December,2017.How much of the gain can Opal exclude?

A wash sale occurs when a taxpayer sells stock or securities at a loss and,within a period of 60 days before or 60 days after the sale,the taxpayer acquires substantially identical stock or securities.

Introduction to Taxation, the Income Tax Formula, and Form 1040EZ

Expanded Tax Formula, forms 1040A and 1040, and Basic Concepts

Gross Income: Inclusions and Exclusions

Adjustments for Adjusted Gross Income

Itemized Deductions

Self-Employed Business Income Line 12 of Form 1040 and Schedule C

Capital Gains and Other Sales of Property Schedule D and Form 4797

Rental Property, Royalties, and Income From Flow- Through Entities Line 17, form 1040, and Schedule E

Tax Credits Form 1040,lines 48 Through 54 and Lines 66A Through 73

Payroll Taxes

Retirement and Other Tax-Deferred Plans and Annuities

At-Riskpassive Activity Loss Rules and the Individual Alternative Minimum Tax

Partnership Taxation

Corporate Taxation

Filters

Exam 12: Special Property Transactions

The ownership test for the sale of a personal residence states:

Raymond exchanges a rental lake house with an adjusted basis of $200,000 and fair market value of $320,000 for a rental beach house with a fair market value of $290,000 and $30,000 cash.What are the recognized gain or loss and the basis of the beach house?

The election to defer a gain under the involuntary conversion rules is reported on:

If a taxpayer excludes the gain on the sale of his personal residence and,within two years,sells a second residence,he or she can exclude (up to $250,000 for a single taxpayer):

Jane and Jason (married taxpayers)sell their personal residence in 2017.In order to exclude the maximum gain allowed for married couples on the sale of the residence,they must:

Related parties include the taxpayer's spouse,ancestors,lineal descendants,but not brothers and sisters.

Laverne exchanges a rental beach house with an adjusted basis of $400,000 and fair market value of $320,000 for a mini-storage building with a fair market value of $200,000 plus $120,000 cash.What is the recognized gain or loss on the exchange and the basis of the mini-storage building?

The gross profit percentage is typically the gross profit divided by the contract price.

A barn with an adjusted basis of $125,000 was destroyed by a tornado on March 5,2017.On May 15,2017,the insurance company paid the owner $150,000.The owner reinvested $170,000 in another barn.What is the basis of the new barn if non-recognition of gain from an involuntary conversion is elected?

Taxpayers are required to use the installment method for deferred payments unless the taxpayer elects not to use the installment method.

The state condemned Cassidy's land on November 25,2017.The land has a $400,000 basis.Cassidy received insurance proceeds of $610,000 on January 27,2018.Cassidy has until what date to defer the gain under the involuntary conversion rules?

Raymond and Susan are married and 55 years old.They sell their personal residence for $850,000 cash.They purchased the house fifteen years ago for $200,000.What is the amount of gain that Raymond and Susan should recognize on the sale?

Matt and Opal were married in April of 2017.Matt has lived in his personal residence for fifteen years and Opal moved into the house after the marriage.Matt died in October 2017.Opal sold the house at a $300,000 gain in December,2017.How much of the gain can Opal exclude?

A wash sale occurs when a taxpayer sells stock or securities at a loss and,within a period of 60 days before or 60 days after the sale,the taxpayer acquires substantially identical stock or securities.

Introduction to Taxation, the Income Tax Formula, and Form 1040EZ

Expanded Tax Formula, forms 1040A and 1040, and Basic Concepts

Gross Income: Inclusions and Exclusions

Adjustments for Adjusted Gross Income

Itemized Deductions

Self-Employed Business Income Line 12 of Form 1040 and Schedule C

Capital Gains and Other Sales of Property Schedule D and Form 4797

Rental Property, Royalties, and Income From Flow- Through Entities Line 17, form 1040, and Schedule E

Tax Credits Form 1040,lines 48 Through 54 and Lines 66A Through 73

Payroll Taxes

Retirement and Other Tax-Deferred Plans and Annuities

At-Riskpassive Activity Loss Rules and the Individual Alternative Minimum Tax

Partnership Taxation

Corporate Taxation

Filters