Exam 13: Property Transactions: Determination of Gain or Loss, basis Considerations, and Nontaxabl

Ramon sells land with an adjusted basis of $120,000 and a fair market value of $175,000 to Pauline,his wife,for $175,000.Discuss how the tax consequences would differ if Ramon and Pauline had never been married.

To qualify as a like-kind exchange,real property must be exchanged either for other real property or for personal property with a statutory life of at least 39 years.

​Alvin is employed by an automobile dealership as its manager.As such,he purchased an SUV for $32,000 (fair market value is $48,000).No other employees are permitted a discount.What is Alvin's basis in the SUV?

For each of the following involuntary conversions,determine if the property qualifies as replacement property. a.​ Chuck's restaurant building is destroyed by fire.He clears the site and builds another restaurant building. b.​ ​ Diane's warehouse which she used for storing inventory is destroyed by a tornado.She purchases another warehouse in which she will store inventory. c.​ ​ Part of Andrew's dairy farm land is condemned to make way for an interstate highway.He uses the condemnation proceeds to construct a barn to be used for storing cattle feed. d.​ ​ Liz owns a shopping mall which is destroyed by a flood.Since the tenant occupancy rate was down,she uses the insurance proceeds to purchase an office building which she will rent to tenants. e.​ ​ Eleanor's Maserati Gran Turismo is stolen.The original cost was $125,000,and she had used it exclusively for personal use.Due to the limited supply of this model,it had appreciated in value.Eleanor received insurance proceeds of $130,000 and uses the proceeds to purchase a replacement Gran Turismo.

Milton purchases land and a factory building for his business for $300,000 with $100,000 being allocated to the land.During the first year,Milton deducts cost recovery of $4,922.Milton's adjusted basis for the building at the end of the first year is $195,078 ($200,000 - $4,922).

Under the taxpayer-use test for a § 1033 involuntary conversion,the taxpayer has less flexibility in qualifying replacement property than under the functional-use test.

The surrender of depreciated boot (fair market value is less than adjusted basis) in a like-kind exchange can result in the recognition of loss.

What is the difference between the depreciation (or cost recovery) allowed and the depreciation (or cost recovery) allowable and what effect does each have on the adjusted basis of property?

Sam and Cheryl,husband and wife,own property jointly.The property has an adjusted basis of $400,000 and a fair market value of $500,000. a.Discuss the rules for the calculation of the adjusted basis of the property to Sam if he inherits his wife's share of the property and Sam and Cheryl live in a community property state. b.If they live in a common law state?

Distinguish between a direct involuntary conversion and an indirect involuntary conversion.

If a taxpayer purchases a business and the price exceeds the fair market value of the listed assets,how is the excess allocated among the purchased assets?

Sam's office building with an adjusted basis of $750,000 and a fair market value of $900,000 is condemned on November 30,2015.Sam is a calendar year taxpayer.He receives a condemnation award of $875,000 on March 1,2016.He builds a new office building at a cost of $845,000 which is completed and paid for on December 31,2018.What is Sam's recognized gain on receipt of the condemnation award and basis for the new office building assuming his objective is to minimize gain recognition?

Gains and losses on nontaxable exchanges are deferred because the tax law recognizes that nontaxable exchanges result in a change in the substance but not the form of the taxpayer's relative economic position.

In October 2015,Ben and Jerry exchange investment realty in a § 1031 like-kind exchange.Ben bought his real estate in 2005 while Jerry purchased his in 2008.In addition to the realty,Ben receives Pearl,Inc.stock worth $10,000 from Jerry.Ben's realized gain is $30,000.On what date does the holding period for Ben's realty received from Jerry begin? When does the holding period for the stock he receives begin?

If the alternate valuation date is elected by the executor in 2015,the total basis of inherited property will be more than what it would have been if the primary valuation date and amount had been used.

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

​Milton owns a bond (face value of $25,000) for which he paid $28,000.Which of the following statements is correct?

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.

Discuss the relationship between the postponement of realized gain under § 1031 (like-kind exchanges) and the adjusted basis and holding period for the replacement property.

Under what circumstances will a distribution by a corporation to its only shareholder result in a capital gain?