Exam 28: Property Transactions: Nontaxable Exchanges

In order to fully defer the gain realized on the involuntary conversion of property,the taxpayer must acquire qualifying replacement property costing at least as much as the cost of the original property.

Ella needs to move her business to a larger facility.She projects a large realized gain on the sale of the old building and prefers not to pay tax on the gain because the sales proceeds are needed to finance the purchase of the new building.In the circumstances,a direct two- or three-party like-kind exchange is not feasible.Ella's sale can still qualify for like-kind treatment if she arranges an appropriate nonsimultaneous exchange.Among other criteria,after the transfer of the old building,the replacement property must be

Olivia exchanges land with a $50,000 basis plus marketable securities with a $20,000 basis for a larger parcel of land worth $110,000 in a transaction that otherwise qualifies as a like-kind exchange.The FMV of the land and marketable securities exchanged by Olivia is $75,000 and $35,000 respectively. a.What is the amount of gain realized and recognized by Olivia on each asset? b.What is the amount of Olivia's basis in the new land?

All of the following qualify as a like-kind exchange except

A taxpayer exchanges an office building held as an investment asset for an office building to be used in her business.The exchange will qualify as like-kind.

The building used in Tim's business was condemned by the city of Lafayette.Tim received a condemnation award of $125,000.He paid $1,200 in lawyer's fees and $800 for an appraisal of the property.Tim's adjusted basis in the building was $60,000.Tim reinvests in similar property costing $110,000,and Tim makes the proper election regarding the property.What is the amount of Tim's realized (not recognized)gain on the condemnation?

Eric exchanges a printing press with an adjusted basis of $64,000 for a smaller model with a $100,000 fair market value.In addition,he receives $20,000 of marketable securities. a.What is the amount of gain realized by Eric? b.What is the amount of gain recognized by Eric? c.What is Eric's basis in the new printing press? d.What is Eric's basis in the marketable securities?

The taxpayer must be occupying the residence at the time of the sale in order for Sec.121 to apply.

On May 1 of this year,Ingrid sold her personal residence for $250,000.Commissions on the sale were $20,000.Ingrid also incurred $10,000 of costs for painting and repairs,which were all completed and paid for two weeks prior to the sale of her home.Ingrid's basis in her old home was $180,000.Ingrid's realized gain upon the sale of her first home is

All of the following are true except

If an exchange qualifies as a like-kind exchange,nonrecognition of gain or loss is elective.

A owns a ranch in Wyoming,which B offers to purchase.A is not willing to sell the ranch but is willing to exchange the ranch for an apartment complex in Louisiana.The complex is available for sale.B purchases the apartment complex in Louisiana from C and transfers it to A in exchange for A's ranch.The ranch and the complex each have a $1,000,000 fair market value.Which of the following is true?

Which of the following statements is not correct regarding the compliance requirements of an involuntary conversion?

Which of the following is not an unforeseen circumstance for purposes of obtaining a partial exclusion of a gain on the sale of a home?

The involuntary conversion provisions which allow deferral of gain are mandatory.

Ike and Tina married and moved into their new home (purchase price $800,000)18 months ago.They are thinking of selling the home which is now worth $1,300,000.They plan to reinvest in a smaller home costing approximately $600,000.What should they consider before selling their home?

All of the following conditions would encourage a taxpayer to avoid like-kind exchange treatment on the disposition of an otherwise qualifying asset except

The holding period of like-kind property received in a nontaxable exchange begins on the day of the exchange.

An office building owned by Abby and used in her business was destroyed in a fire.Abby's adjusted basis in the building was $145,000 and its FMV was $180,000.Abby filed an insurance claim and she was reimbursed $160,000.In that same year,Abby invested $150,000 of the insurance proceeds in another business building. a.Assume Abby made the proper election with regard to the involuntary conversion.What is the amount of gain to be recognized by Abby? b.What is Abby's basis in the new building?

Gena exchanges land held as an investment with a $60,000 basis for other land with a $80,000 FMV and a motorcycle with a $10,000 FMV.The acquired land is to be held for investment and the motorcycle is for personal use.What is the amount of recognized gain?