Question 1

A partnership always takes a carryover basis in property received from a partner in exchange for an equity interest in the partnership.

Accepted Answer

A) True 
 B)False

Question 2

When unrelated parties agree to an exchange of noncash properties,the economic presumption is that the properties are of equal value.

Accepted Answer

A) True 
 B)False

Question 3

Berly Company transferred an old asset with a $12,300 adjusted tax basis in exchange for a new asset worth $20,000.Which of the following statements is false?

Accepted Answer

A) The old asset's FMV is $20,000. 
B) If the exchange is nontaxable,Berly's tax basis in the new asset is $12,300. 
C) If the exchange is taxable,Berly's recognized gain is $7,700. 
D) None of the statements is false. 
A) The old asset's FMV is $20,000. 
B) If the exchange is nontaxable,Berly's tax basis in the new asset is $12,300. 
C) If the exchange is taxable,Berly's recognized gain is $7,700. 
D) None of the statements is false.

Question 4

Which of the following statements about the inclusion of boot in a nontaxable exchange is false?

Accepted Answer

A) The purpose of including boot in a nontaxable exchange is to equalize the adjusted tax bases of the properties exchanged. 
B) The receipt of boot can trigger gain recognition but not loss recognition. 
C) The party paying the boot includes the FMV of the boot in the tax basis of the property received. 
D) None of the above is false. 
A) The purpose of including boot in a nontaxable exchange is to equalize the adjusted tax bases of the properties exchanged. 
B) The receipt of boot can trigger gain recognition but not loss recognition. 
C) The party paying the boot includes the FMV of the boot in the tax basis of the property received. 
D) None of the above is false.

Question 5

A taxpayer who transfers property for corporate stock can defer gain recognition only if the taxpayer owns at least 50% of the corporation's outstanding stock immediately after the exchange.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following statements about boot included in a nontaxable exchange is false?

Accepted Answer

A) The purpose of boot is to equalize the values of the exchanged properties. 
B) The payment of boot triggers recognition of realized gain to the payer. 
C) The receipt of boot triggers recognition of realized gain to the recipient. 
D) The receipt of boot does not trigger recognition of realized loss to the recipient. 
A) The purpose of boot is to equalize the values of the exchanged properties. 
B) The payment of boot triggers recognition of realized gain to the payer. 
C) The receipt of boot triggers recognition of realized gain to the recipient. 
D) The receipt of boot does not trigger recognition of realized loss to the recipient.

Question 7

In March,a flood completely destroyed three delivery vans owned by Totle Inc.Totle's adjusted tax basis in the vans was $48,900.Totle received a $90,000 reimbursement from its property insurance company,and on September 8,it purchased one new delivery van for $70,000.Compute Totle's recognized gain on loss on the involuntary conversion and its tax basis in the new van.

Accepted Answer

A) No recognized gain or loss; $48,900 basis in the van 
B) $20,000 recognized gain; $70,000 basis in the van 
C) $20,000 recognized gain; $48,900 basis in the van 
D) None of the above 
A) No recognized gain or loss; $48,900 basis in the van 
B) $20,000 recognized gain; $70,000 basis in the van 
C) $20,000 recognized gain; $48,900 basis in the van 
D) None of the above

Question 8

Eight years ago,Prescott Inc.realized a $16,200 gain on the exchange of old equipment for new equipment.Prescott included the gain in book income,but the exchange was nontaxable.This year,Prescott sold the new equipment for $2,500.At date of sale,the equipment's book basis and tax basis had both been depreciated to zero.Which of the following statements is true?

Accepted Answer

A) The nontaxable exchange had no effect on Prescott's deferred tax accounts. 
B) The nontaxable exchange resulted in a deferred tax asset. 
C) The sale of the new equipment had no effect on Prescott's deferred tax accounts. 
D) None of the above is true. 
A) The nontaxable exchange had no effect on Prescott's deferred tax accounts. 
B) The nontaxable exchange resulted in a deferred tax asset. 
C) The sale of the new equipment had no effect on Prescott's deferred tax accounts. 
D) None of the above is true.

Question 9

Five years ago,Q&J Inc.transferred land with a $345,000 book and tax basis for a different parcel of land worth $472,000.Q&J included its $127,000 realized gain in book income,but the exchange was nontaxable.This year,Q&J sold the parcel of land received in the exchange for $533,000 cash.Which of the following statements is true?

Accepted Answer

A) The nontaxable exchange had no effect on Q&J's deferred tax accounts. 
B) The nontaxable exchange resulted in a deferred tax liability that reversed this year. 
C) The nontaxable exchange resulted in a deferred tax asset that reversed this year. 
D) The sale of the parcel of land had no effect on Q&J's deferred tax accounts. 
A) The nontaxable exchange had no effect on Q&J's deferred tax accounts. 
B) The nontaxable exchange resulted in a deferred tax liability that reversed this year. 
C) The nontaxable exchange resulted in a deferred tax asset that reversed this year. 
D) The sale of the parcel of land had no effect on Q&J's deferred tax accounts.

Question 10

Mr.Bentley exchanged investment land subject to a $300,000 mortgage for commercial real estate subject to a $188,000 mortgage.Mr.Bentley is treated as paying $112,000 boot in the exchange.

Accepted Answer

A) True 
 B)False

Question 11

The tax basis in property received in a like-kind exchange in which no gain or loss is recognized is a:

Accepted Answer

A) FMV basis 
B) Cost basis 
C) Substituted basis 
D) Carryover basis 
A) FMV basis 
B) Cost basis 
C) Substituted basis 
D) Carryover basis

Question 12

In a like-kind exchange in which both properties are subject to a mortgage,both parties to the exchange are treated as receiving boot equal to the relief of their respective mortgage.

Accepted Answer

A) True 
 B)False

Question 13

Johnson Inc.and C&K Company entered into an exchange of real property.Here is the information for the properties to be exchanged.     Pursuant to the exchange,C&K paid $25,000 cash to Johnson and assumed the mortgage on the Johnson property.Compute C&K's gain recognized on the exchange and its tax basis in the property received from Johnson.

Accepted Answer

A) $200,000 gain recognized; $662,000 basis in Johnson property. 
B) No gain recognized; $462,000 basis in Johnson property. 
C) No gain recognized; $487,000 basis in Johnson property. 
D) None of the choices are correct. 
A) $200,000 gain recognized; $662,000 basis in Johnson property. 
B) No gain recognized; $462,000 basis in Johnson property. 
C) No gain recognized; $487,000 basis in Johnson property. 
D) None of the choices are correct.

Question 14

Mrs.Brinkley transferred business property (FMV $340,200; adjusted tax basis $111,700)to M&W Inc.in exchange for a 36% interest in M&W Partnership.Determine Mrs.Brinkley's realized and recognized gain on the exchange and the tax basis in her partnership interest.

Accepted Answer

A) $228,500 gain realized and recognized; $340,200 basis in M&W interest 
B) $228,500 gain realized and recognized; $111,700 basis in M&W interest 
C) $228,500 gain realized and no gain recognized; $111,700 basis in M&W interest 
D) None of the above 
A) $228,500 gain realized and recognized; $340,200 basis in M&W interest 
B) $228,500 gain realized and recognized; $111,700 basis in M&W interest 
C) $228,500 gain realized and no gain recognized; $111,700 basis in M&W interest 
D) None of the above

Question 15

Signo Inc.'s current year income statement includes a $21,000 gain realized on the exchange of an old business asset for a new business asset.If the exchange is nontaxable,Signo has a $21,000 favorable permanent book/tax difference.

Accepted Answer

A) True 
 B)False

Question 16

Mr.Slake sold 1,580 shares of publicly traded DDL stock (tax basis $49,240)for $40,000 cash on February 13.He paid $43,000 cash to purchase 1,600 DDL shares on March 2.Compute Mr.Slake's loss recognized on the February 13 sale and determine his tax basis in the 1,600 shares.

Accepted Answer

A) No loss recognized; $40,000 basis 
B) $9,240 loss recognized; $43,000 basis 
C) No loss recognized; $52,240 basis 
D) No loss recognized $49,240 basis 
A) No loss recognized; $40,000 basis 
B) $9,240 loss recognized; $43,000 basis 
C) No loss recognized; $52,240 basis 
D) No loss recognized $49,240 basis

Question 17

On January 21,2007,Andy purchased 350 shares of Baker common stock for $24,500.On November 13,2017,he sold the 350 shares for $7,250.On December 1,2017,Andy purchased 350 shares of Baker common stock for $8,000.What is Andy's basis in these shares?

Accepted Answer

A) $8,000 
B) $25,250 
C) $24,500 
D) $17,250 
A) $8,000 
B) $25,250 
C) $24,500 
D) $17,250

Question 18

Mr.Weller and the Olson Partnership entered into an exchange of investment real property.Mr.Weller's property was subject to a $428,000 mortgage,which Olson assumed.Olson's property was subject to a $235,000 mortgage,which Mr.Weller assumed.Which of the following statements is true?

Accepted Answer

A) Mr.Weller received $193,000 boot; Olson paid $193,000 boot. 
B) Mr.Weller paid $193,000 boot; Olson received $193,000 boot. 
C) Mr.Weller received $428,000 boot; Olson received $235,000 boot. 
D) Mr.Weller paid $428,000 boot; Olson paid $235,000 boot. 
A) Mr.Weller received $193,000 boot; Olson paid $193,000 boot. 
B) Mr.Weller paid $193,000 boot; Olson received $193,000 boot. 
C) Mr.Weller received $428,000 boot; Olson received $235,000 boot. 
D) Mr.Weller paid $428,000 boot; Olson paid $235,000 boot.

Question 19

Nagin Inc.transferred an old asset in exchange for a new asset worth $84,000 and $6,000 cash.The old asset and new asset were like-kind properties.Which of the following statements is true?

Accepted Answer

A) If Nagin's basis in the old asset was $95,000,Nagin can recognize a $5,000 loss. 
B) If Nagin's basis in the old asset was $85,000,Nagin must recognize a $6,000 gain. 
C) If Nagin's basis in the old asset was $79,200,Nagin must recognize a $6,000 gain. 
D) None of the above is true. 
A) If Nagin's basis in the old asset was $95,000,Nagin can recognize a $5,000 loss. 
B) If Nagin's basis in the old asset was $85,000,Nagin must recognize a $6,000 gain. 
C) If Nagin's basis in the old asset was $79,200,Nagin must recognize a $6,000 gain. 
D) None of the above is true.

Question 20

Loonis Inc.and Rhea Company formed LooNR Inc.by transferring business assets in exchange for 1,000 shares of LooNR common stock.Loonis transferred assets with a $820,000 FMV and a $444,000 adjusted tax basis and received 820 shares.Rhea transferred assets with a $180,000 FMV and a $75,000 adjusted tax basis and received 180 shares.Which of the following statements is true?

Accepted Answer

A) The FMV of Rhea's 180 shares is $180,000. 
B) Rhea's exchange of assets for stock is taxable because Rhea is not in control of LooNR immediately after the exchange. 
C) LooNR recognizes a $105,000 gain on the exchange of its stock for Rhea's assets. 
D) None of the above is true. 
A) The FMV of Rhea's 180 shares is $180,000. 
B) Rhea's exchange of assets for stock is taxable because Rhea is not in control of LooNR immediately after the exchange. 
C) LooNR recognizes a $105,000 gain on the exchange of its stock for Rhea's assets. 
D) None of the above is true.

A partnership always takes a carryover basis in property received from a partner in exchange for an equity interest in the partnership.

When unrelated parties agree to an exchange of noncash properties,the economic presumption is that the properties are of equal value.

Berly Company transferred an old asset with a $12,300 adjusted tax basis in exchange for a new asset worth $20,000.Which of the following statements is false?

Which of the following statements about the inclusion of boot in a nontaxable exchange is false?

A taxpayer who transfers property for corporate stock can defer gain recognition only if the taxpayer owns at least 50% of the corporation's outstanding stock immediately after the exchange.

Which of the following statements about boot included in a nontaxable exchange is false?

Mr.Bentley exchanged investment land subject to a $300,000 mortgage for commercial real estate subject to a $188,000 mortgage.Mr.Bentley is treated as paying $112,000 boot in the exchange.

The tax basis in property received in a like-kind exchange in which no gain or loss is recognized is a:

In a like-kind exchange in which both properties are subject to a mortgage,both parties to the exchange are treated as receiving boot equal to the relief of their respective mortgage.

Mrs.Brinkley transferred business property (FMV $340,200; adjusted tax basis $111,700)to M&W Inc.in exchange for a 36% interest in M&W Partnership.Determine Mrs.Brinkley's realized and recognized gain on the exchange and the tax basis in her partnership interest.

Signo Inc.'s current year income statement includes a $21,000 gain realized on the exchange of an old business asset for a new business asset.If the exchange is nontaxable,Signo has a $21,000 favorable permanent book/tax difference.

Mr.Slake sold 1,580 shares of publicly traded DDL stock (tax basis $49,240)for $40,000 cash on February 13.He paid $43,000 cash to purchase 1,600 DDL shares on March 2.Compute Mr.Slake's loss recognized on the February 13 sale and determine his tax basis in the 1,600 shares.

On January 21,2007,Andy purchased 350 shares of Baker common stock for $24,500.On November 13,2017,he sold the 350 shares for $7,250.On December 1,2017,Andy purchased 350 shares of Baker common stock for $8,000.What is Andy's basis in these shares?

Mr.Weller and the Olson Partnership entered into an exchange of investment real property.Mr.Weller's property was subject to a $428,000 mortgage,which Olson assumed.Olson's property was subject to a $235,000 mortgage,which Mr.Weller assumed.Which of the following statements is true?

Nagin Inc.transferred an old asset in exchange for a new asset worth $84,000 and $6,000 cash.The old asset and new asset were like-kind properties.Which of the following statements is true?

Taxes and Taxing Jurisdictions

Policy Standards for a Good Tax

Taxes As Transaction Costs

Maxims of Income Tax Planning

Tax Research

Taxable Income From Business Operations

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Sole Proprietorships, Partnerships, llcs, and S Corporations

The Corporate Taxpayer

The Choice of Business Entity

Jurisdictional Issues in Business Taxation

The Individual Tax Formula

Compensation and Retirement Planning

Investment and Personal Financial Planning

Tax Consequences of Personal Activities

The Tax Compliance Process

Filters

Exam 9: Nontaxable Exchanges

A partnership always takes a carryover basis in property received from a partner in exchange for an equity interest in the partnership.

When unrelated parties agree to an exchange of noncash properties,the economic presumption is that the properties are of equal value.

Berly Company transferred an old asset with a $12,300 adjusted tax basis in exchange for a new asset worth $20,000.Which of the following statements is false?

Which of the following statements about the inclusion of boot in a nontaxable exchange is false?

A taxpayer who transfers property for corporate stock can defer gain recognition only if the taxpayer owns at least 50% of the corporation's outstanding stock immediately after the exchange.

Which of the following statements about boot included in a nontaxable exchange is false?

Mr.Bentley exchanged investment land subject to a $300,000 mortgage for commercial real estate subject to a $188,000 mortgage.Mr.Bentley is treated as paying $112,000 boot in the exchange.

The tax basis in property received in a like-kind exchange in which no gain or loss is recognized is a:

In a like-kind exchange in which both properties are subject to a mortgage,both parties to the exchange are treated as receiving boot equal to the relief of their respective mortgage.

Mrs.Brinkley transferred business property (FMV $340,200; adjusted tax basis $111,700)to M&W Inc.in exchange for a 36% interest in M&W Partnership.Determine Mrs.Brinkley's realized and recognized gain on the exchange and the tax basis in her partnership interest.

Signo Inc.'s current year income statement includes a $21,000 gain realized on the exchange of an old business asset for a new business asset.If the exchange is nontaxable,Signo has a $21,000 favorable permanent book/tax difference.

Mr.Slake sold 1,580 shares of publicly traded DDL stock (tax basis $49,240)for $40,000 cash on February 13.He paid $43,000 cash to purchase 1,600 DDL shares on March 2.Compute Mr.Slake's loss recognized on the February 13 sale and determine his tax basis in the 1,600 shares.

On January 21,2007,Andy purchased 350 shares of Baker common stock for $24,500.On November 13,2017,he sold the 350 shares for $7,250.On December 1,2017,Andy purchased 350 shares of Baker common stock for $8,000.What is Andy's basis in these shares?

Mr.Weller and the Olson Partnership entered into an exchange of investment real property.Mr.Weller's property was subject to a $428,000 mortgage,which Olson assumed.Olson's property was subject to a $235,000 mortgage,which Mr.Weller assumed.Which of the following statements is true?

Nagin Inc.transferred an old asset in exchange for a new asset worth $84,000 and $6,000 cash.The old asset and new asset were like-kind properties.Which of the following statements is true?

Taxes and Taxing Jurisdictions

Policy Standards for a Good Tax

Taxes As Transaction Costs

Maxims of Income Tax Planning

Tax Research

Taxable Income From Business Operations

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Sole Proprietorships, Partnerships, llcs, and S Corporations

The Corporate Taxpayer

The Choice of Business Entity

Jurisdictional Issues in Business Taxation

The Individual Tax Formula

Compensation and Retirement Planning

Investment and Personal Financial Planning

Tax Consequences of Personal Activities

The Tax Compliance Process

Filters