Question 1

Replacing a building with land qualifies as replacement property under the involuntary conversion rules relevant to a casualty.

Accepted Answer

A) True 
 B)False  False

Question 2

Yael exchanges an office building worth $150,000 for investment land worth $175,000.He also provided stock worth $25,000.Yael's adjusted basis in the building and stock is $180,000 and $11,000,respectively.How much gain or loss will Yael recognize on the exchange?

Accepted Answer

A) $-0- 
B) ($30,000) 
C) ($16,000) 
D) $14,000 
A) $-0- 
B) ($30,000) 
C) ($16,000) 
D) $14,000 D

Question 3

Vector Inc.'s office building burns down on October 31,2013.Vector,a calendar year taxpayer,finally settles with the insurance company on February 3,2014.In order to defer the gain realized on the building,Vector must acquire another office building by February 3,2016.

Accepted Answer

A) True 
 B)False  False

Question 4

If there is a like-kind exchange of property between related parties,how long do they have to wait to dispose of the property received in order to avoid having to recognize any gain on the exchange?

Accepted Answer

A) 6 months 
B) 1 year 
C) 2 years 
D) no waiting period 
A) 6 months 
B) 1 year 
C) 2 years 
D) no waiting period

Question 5

If a principal residence is sold before satisfying the ownership and use tests,part of the gain may be excluded if the sale is due to a change in employment,health,or unforeseen circumstances.

Accepted Answer

A) True 
 B)False

Question 6

Each of the following is true of deferral of gain attributable to the involuntary conversion of personal property with the exception of

Accepted Answer

A) gain deferral is elective,except for direct conversions. 
B) the replacement property may be acquired by gift,inheritance,or purchase. 
C) qualifying replacement property must be acquired within a specified time period. 
D) replacement property must be similar or related in service or use to the converted property. 
A) gain deferral is elective,except for direct conversions. 
B) the replacement property may be acquired by gift,inheritance,or purchase. 
C) qualifying replacement property must be acquired within a specified time period. 
D) replacement property must be similar or related in service or use to the converted property.

Question 7

Discuss why a taxpayer would want to avoid like-kind exchange provisions.

Accepted Answer

If the sale of the property results in a

Question 8

Alex owns an office building which the state condemns on January 15,2013.Alex receives the condemnation award on April 1,2013.In order to qualify for nonrecognition of gain on this involuntary conversion,what is the last date for Alex to acquire qualified replacement property?

Accepted Answer

A) January 15,2015 
B) January 15,2016 
C) December 31,2015 
D) December 31,2016 
A) January 15,2015 
B) January 15,2016 
C) December 31,2015 
D) December 31,2016

Question 9

Where non-like-kind property other than cash is received as boot,the amount of the boot is the property's fair market value.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

May a taxpayer elect under Sec.1033 to defer recognition of loss resulting from an involuntary conversion?

Accepted Answer

Sec.1033 does not apply to los

Question 12

Kareem's office building is destroyed by fire on April 11,2013.Settlement is reached with the insurance company on November 1,2013 when he receives a check for $900,000.The property had recently been appraised for $920,000.Kareem's adjusted basis in the building was $800,000.
a.What is Kareem's realized gain or loss?
b.Assume Kareem wishes to defer the maximum amount of gain.Indicate:
   c.Assume that instead of a fire,the state forces Kareem to sell the property.Indicate how your responses to part b would differ.

Accepted Answer

a.Realized gain = $1

Question 13

Discuss the basis rules of property received in a nontaxable like-kind exchange.

Accepted Answer

The basis of property received in a nont

Question 14

All of the following statements are true with regard to personal residences except:

Accepted Answer

A) Temporarily renting property that was formerly the taxpayer's principal residence does not automatically preclude the use of Sec.121. 
B) To qualify for favorable tax treatment under Sec.121,the residence must be either the taxpayer's principal residence or a secondary residence. 
C) In the case of married taxpayers,an individual may claim the exclusion even if the individual's spouse used the exclusion within the past two years. 
D) Houseboats,house trailers,and condominium apartments may qualify as a principal residence. 
A) Temporarily renting property that was formerly the taxpayer's principal residence does not automatically preclude the use of Sec.121. 
B) To qualify for favorable tax treatment under Sec.121,the residence must be either the taxpayer's principal residence or a secondary residence. 
C) In the case of married taxpayers,an individual may claim the exclusion even if the individual's spouse used the exclusion within the past two years. 
D) Houseboats,house trailers,and condominium apartments may qualify as a principal residence.

Question 15

Cheryl owns 200 shares of Cornerstone Corporation common stock which has an adjusted basis of $60,000 and a fair market value of $75,000.John owns 200 shares of Cable Corporation with a $75,000 fair market value.
a.If Cheryl and John exchange their stock,what is the amount of Cheryl's realized gain?
b.If Cheryl and John exchange their stock,what is the amount of Cheryl's recognized gain?

Accepted Answer

a.$75,000 - $60,000 = $15,000

Question 16

Jason owns a warehouse that is used in business.The FMV of the warehouse is $200,000 (basis $120,000),and the warehouse is subject to a mortgage of $40,000.Jason exchanges the warehouse for land valued at $150,000.The other party also pays him $10,000 cash and assumes the mortgage on the warehouse.Jason's basis in the land received will be

Accepted Answer

A) $120,000. 
B) $150,000. 
C) $180,000. 
D) $200,000. 
A) $120,000. 
B) $150,000. 
C) $180,000. 
D) $200,000.

Question 17

Which of the following statements is not true with regard to like-kind exchanges?

Accepted Answer

A) Nonrecognition of gains and losses is mandatory if the exchange is a like-kind exchange. 
B) The holding period of like-kind property received includes the holding period of the property exchanged. 
C) A loss is always recognized if the taxpayer transfers non-like-kind personal use property in an otherwise like-kind exchange. 
D) The basis of property received in an exchange is equal to the basis of the property exchanged less the boot received plus the gain recognized and less any loss recognized. 
A) Nonrecognition of gains and losses is mandatory if the exchange is a like-kind exchange. 
B) The holding period of like-kind property received includes the holding period of the property exchanged. 
C) A loss is always recognized if the taxpayer transfers non-like-kind personal use property in an otherwise like-kind exchange. 
D) The basis of property received in an exchange is equal to the basis of the property exchanged less the boot received plus the gain recognized and less any loss recognized.

Question 18

Which of the following statements is false regarding involuntary conversions?

Accepted Answer

A) A taxpayer must replace the destroyed property within the same tax year in which the gain is realized. 
B) A taxpayer cannot elect to defer recognition of a loss resulting from an involuntary conversion. 
C) If deferral of gain is elected,the holding period of the converted property carries over to the replacement property. 
D) Gain may be deferred if the property is involuntarily converted into property that is similar or related in service or use to the converted property. 
A) A taxpayer must replace the destroyed property within the same tax year in which the gain is realized. 
B) A taxpayer cannot elect to defer recognition of a loss resulting from an involuntary conversion. 
C) If deferral of gain is elected,the holding period of the converted property carries over to the replacement property. 
D) Gain may be deferred if the property is involuntarily converted into property that is similar or related in service or use to the converted property.

Question 19

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?

Accepted Answer

The answer of An office building owned by Abby and...

Question 20

Luke's offshore drilling rig with a $700,000 adjusted basis is destroyed by a hurricane.He collects $620,000 from the insurance company and purchases a new drilling rig for $600,000.
a.What are the tax consequences of these transactions?
b.What is the basis of the new rig?

Accepted Answer

a.A taxpayer may not defer rec

Replacing a building with land qualifies as replacement property under the involuntary conversion rules relevant to a casualty.

Yael exchanges an office building worth $150,000 for investment land worth $175,000.He also provided stock worth $25,000.Yael's adjusted basis in the building and stock is $180,000 and $11,000,respectively.How much gain or loss will Yael recognize on the exchange?

Vector Inc.'s office building burns down on October 31,2013.Vector,a calendar year taxpayer,finally settles with the insurance company on February 3,2014.In order to defer the gain realized on the building,Vector must acquire another office building by February 3,2016.

If there is a like-kind exchange of property between related parties,how long do they have to wait to dispose of the property received in order to avoid having to recognize any gain on the exchange?

If a principal residence is sold before satisfying the ownership and use tests,part of the gain may be excluded if the sale is due to a change in employment,health,or unforeseen circumstances.

Each of the following is true of deferral of gain attributable to the involuntary conversion of personal property with the exception of

Discuss why a taxpayer would want to avoid like-kind exchange provisions.

Alex owns an office building which the state condemns on January 15,2013.Alex receives the condemnation award on April 1,2013.In order to qualify for nonrecognition of gain on this involuntary conversion,what is the last date for Alex to acquire qualified replacement property?

Where non-like-kind property other than cash is received as boot,the amount of the boot is the property's fair market value.

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

May a taxpayer elect under Sec.1033 to defer recognition of loss resulting from an involuntary conversion?

Discuss the basis rules of property received in a nontaxable like-kind exchange.

All of the following statements are true with regard to personal residences except:

Which of the following statements is not true with regard to like-kind exchanges?

Which of the following statements is false regarding involuntary conversions?

Luke's offshore drilling rig with a $700,000 adjusted basis is destroyed by a hurricane.He collects $620,000 from the insurance company and purchases a new drilling rig for $600,000. a.What are the tax consequences of these transactions? b.What is the basis of the new rig?

An Introduction to Taxation

Determination of Tax

Gross Income: Inclusions

Gross Income: Exclusions

Property Transactions: Capital Gains and Losses

Deductions and Losses

Itemized Deductions

Losses and Bad Debts

Employee Expenses and Deferred Compensation

Depreciation, cost Recovery, amortization, and Depletion

Accounting Periods and Methods

Property Transactions: Section 1231 and Recapture

Special Tax Computation Methods, tax Credits, and Payment of Tax

Tax Research

Corporations

Partnerships and S Corporations

Taxes and Investment Planning

Filters

Exam 12: Property Transactions: Nontaxable Exchanges

Replacing a building with land qualifies as replacement property under the involuntary conversion rules relevant to a casualty.

Yael exchanges an office building worth $150,000 for investment land worth $175,000.He also provided stock worth $25,000.Yael's adjusted basis in the building and stock is $180,000 and $11,000,respectively.How much gain or loss will Yael recognize on the exchange?

Vector Inc.'s office building burns down on October 31,2013.Vector,a calendar year taxpayer,finally settles with the insurance company on February 3,2014.In order to defer the gain realized on the building,Vector must acquire another office building by February 3,2016.

If there is a like-kind exchange of property between related parties,how long do they have to wait to dispose of the property received in order to avoid having to recognize any gain on the exchange?

If a principal residence is sold before satisfying the ownership and use tests,part of the gain may be excluded if the sale is due to a change in employment,health,or unforeseen circumstances.

Each of the following is true of deferral of gain attributable to the involuntary conversion of personal property with the exception of

Discuss why a taxpayer would want to avoid like-kind exchange provisions.

Alex owns an office building which the state condemns on January 15,2013.Alex receives the condemnation award on April 1,2013.In order to qualify for nonrecognition of gain on this involuntary conversion,what is the last date for Alex to acquire qualified replacement property?

Where non-like-kind property other than cash is received as boot,the amount of the boot is the property's fair market value.

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

May a taxpayer elect under Sec.1033 to defer recognition of loss resulting from an involuntary conversion?

Discuss the basis rules of property received in a nontaxable like-kind exchange.

All of the following statements are true with regard to personal residences except:

Which of the following statements is not true with regard to like-kind exchanges?

Which of the following statements is false regarding involuntary conversions?

Luke's offshore drilling rig with a $700,000 adjusted basis is destroyed by a hurricane.He collects $620,000 from the insurance company and purchases a new drilling rig for $600,000. a.What are the tax consequences of these transactions? b.What is the basis of the new rig?

An Introduction to Taxation

Determination of Tax

Gross Income: Inclusions

Gross Income: Exclusions

Property Transactions: Capital Gains and Losses

Deductions and Losses

Itemized Deductions

Losses and Bad Debts

Employee Expenses and Deferred Compensation

Depreciation, cost Recovery, amortization, and Depletion

Accounting Periods and Methods

Property Transactions: Section 1231 and Recapture

Special Tax Computation Methods, tax Credits, and Payment of Tax

Tax Research

Corporations

Partnerships and S Corporations

Taxes and Investment Planning

Filters