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

The taxpayer owns stock with an adjusted basis of $15,000 and a fair market value of $8,000.If the stock or cash is going to be given to her niece,it is preferable for the taxpayer to sell the stock and give the $8,000 of cash to her niece.The same preference would exist if the recipient were a qualified charitable organization.

The holding period for nontaxable stock dividends that are the same type (i.e. ,common on common) includes the holding period of the original shares,but the holding period for nontaxable stock dividends that are not the same type (i.e. ,preferred on common) is new and begins on the date the dividend is received.

The amount of a corporate distribution qualifying for capital recovery treatment which exceeds the shareholder-recipient's basis in the stock investment is treated as a capital gain.

Paul sells property with an adjusted basis of $45,000 to his daughter Dean,for $38,000.Dean subsequently sells the property to her brother,Preston,for $38,000.Three years later,Preston sells the property to Hun,an unrelated party,for $50,000.What is Preston's recognized gain or loss on the sale of the property to Hun?

A building located in Virginia (used in business) exchanged for a building located in France (used in business) cannot qualify for like-kind exchange treatment.

An exchange of two items of personal property (personalty) that belong to different general business asset classes qualifies for nonrecognition under § 1031 as long as both properties are used in the taxpayer's trade or business.

If the taxpayer qualifies under § 1033 (nonrecognition of gain from an involuntary conversion),makes the appropriate election,and the amount reinvested in replacement property is less than the amount realized,realized gain is:

For disallowed losses on related-party transactions,who has the right of offset?

If boot is received in a § 1031 like-kind exchange that results in some of the realized gain being recognized,the holding period for both the like-kind property and the boot received begins on the date of the exchange.

The amount received for a utility easement on land is included in the gross income of the taxpayer.

Jamie is terminally ill and does not expect to live much longer.Pondering the consequences of her estate,she decides how to allocate her property to her nephews.She makes a gift of depreciated property (i.e. ,adjusted basis exceeds fair market value) to Will,a gift of appreciated property (i.e. ,fair market value exceeds adjusted basis) to Jim,and leaves appreciated property to Sam in her will.Each of the properties has the same fair market value.From an income tax perspective,which nephew is her favorite?

In computing the amount realized when the fair market value of the property received cannot be determined,the fair market value of the property surrendered may be used.

The carryover basis to a donee for property received by gift can be an amount greater than the donor's adjusted basis.

If there is an involuntary conversion (i.e. ,casualty,theft,or condemnation) of the taxpayer's principal residence,the realized gain may be postponed as a § 1033 involuntary conversion and/or excluded as a § 121 sale of a principal residence.

Edith's manufacturing plant is destroyed by fire on the afternoon of November 3,2015.The adjusted basis is $800,000.The insurance company offers a settlement of $700,000.After protracted negotiations,Edith receives $825,000 on June 9,2016.Edith is a fiscal year taxpayer whose tax year ends on June 30th.What is the latest date that Edith can invest the proceeds in qualifying replacement property and elect to defer the gain under § 1033?

Gil's office building (basis of $225,000 and fair market value $275,000) is destroyed by a hurricane.Due to a 30% co-insurance clause,Gil receives insurance proceeds of $192,500 two months after the date of the loss.One month later,Gil uses the insurance proceeds to purchase a new office building for $275,000.His adjusted basis for the new building is $307,500 ($275,000 cost + $32,500 postponed loss).

Katie sells her personal use automobile for $12,000.She purchased the car three years ago for $25,000.What is Katie's recognized gain or loss?

The nonrecognition of gains and losses under § 1031 is mandatory for gains and elective for losses.

What effect does a deductible casualty loss have on the adjusted basis of property?

Abby exchanges an SUV that she has held for personal use plus $24,000 for a new SUV which she will use exclusively in her sole proprietorship business.This exchange qualifies for nontaxable exchange treatment.