Question 1

The holding period for boot property received begins on the day after the date of the exchange.

Accepted Answer

A) True 
 B)False

Question 2

If the threat of condemnation exists and the taxpayer has reasonable grounds to believe that the property will be condemned,the taxpayer may elect to defer gain even if the taxpayer sells the property to a party other than the governmental unit that is threatening to condemn the property.

Accepted Answer

A) True 
 B)False

Question 3

The exchange of a partnership interest for an interest in another partnership qualifies as a like-kind exchange.

Accepted Answer

A) True 
 B)False

Question 4

A loss on the sale of a taxpayer's personal residence is deductible if the taxpayer owned and lived in the home for two of five years.

Accepted Answer

A) True 
 B)False

Question 5

Ed owns a racehorse with a $600,000 basis used for breeding purposes.The racehorse is killed in a tornado,and Ed collects $1,000,000 from the insurance company.He purchases another horse for $550,000.What is the amount of gain recognized on the transaction?

Accepted Answer

A) $0 
B) $50,000 
C) $350,000 
D) $400,000 
A) $0 
B) $50,000 
C) $350,000 
D) $400,000

Question 6

If the taxpayer elects to defer the gain on an involuntary conversion,the holding period of the replacement property begins on the date of purchase.

Accepted Answer

A) True 
 B)False

Question 7

All or part of gain realized on an involuntary conversion is deferred but not permanently excluded if qualifying replacement property is acquired within the requisite period of time.

Accepted Answer

A) True 
 B)False

Question 8

If property is involuntarily converted into similar property,the basis and holding period of the converted property carry over to the basis and holding period of the replacement property.

Accepted Answer

A) True 
 B)False

Question 9

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?

Accepted Answer

A) $ -0- 
B) $50,000 
C) $63,000 
D) $65,000 
A) $ -0- 
B) $50,000 
C) $63,000 
D) $65,000

Question 10

Which of the following statements is false with regard to the ownership and use tests under Sec.121?

Accepted Answer

A) The taxpayer must be occupying the residence at the time of the sale in order for Sec.121 to apply. 
B) 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. 
C) For purposes of the two-year ownership rule,a taxpayer's period of ownership includes the period during which the taxpayer's deceased spouse owned the residence. 
D) When a taxpayer receives a residence from a spouse or an ex-spouse incident to a divorce,the taxpayer's period of owning the property includes the time the residence was owned by the spouse or ex-spouse. 
A) The taxpayer must be occupying the residence at the time of the sale in order for Sec.121 to apply. 
B) 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. 
C) For purposes of the two-year ownership rule,a taxpayer's period of ownership includes the period during which the taxpayer's deceased spouse owned the residence. 
D) When a taxpayer receives a residence from a spouse or an ex-spouse incident to a divorce,the taxpayer's period of owning the property includes the time the residence was owned by the spouse or ex-spouse.

Question 11

Generally,a full exclusion of gain under Sec.121 upon the sale of a personal residence applies to only one sale or exchange every

Accepted Answer

A) six months. 
B) year. 
C) two years. 
D) five years. 
A) six months. 
B) year. 
C) two years. 
D) five years.

Question 12

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?

Accepted Answer

a.The realized gain is $56,000 [($100,00

Question 13

Realized gain or loss must be recognized unless a specific Code section provides for nonrecognition treatment.

Accepted Answer

A) True 
 B)False

Question 14

Emily owns land for investment purposes that has a FMV of $300,000 (basis of $260,000).She exchanges the land,plus $40,000 cash,for a warehouse to be used in her business.The warehouse is worth $420,000,but is subject to a mortgage of $80,000 which Emily will assume.The gain realized by Emily on the exchange is

Accepted Answer

A) $40,000. 
B) $ 80,000. 
C) $ 120,000. 
D) $ 160,000. 
A) $40,000. 
B) $ 80,000. 
C) $ 120,000. 
D) $ 160,000.

Question 15

Which of the following statements regarding involuntary conversions is incorrect?

Accepted Answer

A) With some exceptions,the replacement property must be similar or related in service or use to the property converted. 
B) The functional-use test is more restrictive than the like-kind test. 
C) The taxpayer-use test applies to the involuntary conversion of rental property owned by an investor. 
D) Real property used in a trade or business that is condemned must be replaced with property which has the same functional use as the converted property. 
A) With some exceptions,the replacement property must be similar or related in service or use to the property converted. 
B) The functional-use test is more restrictive than the like-kind test. 
C) The taxpayer-use test applies to the involuntary conversion of rental property owned by an investor. 
D) Real property used in a trade or business that is condemned must be replaced with property which has the same functional use as the converted property.

Question 16

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?

Accepted Answer

A) The transaction qualifies as a like-kind exchange for B but not for A. 
B) The transaction qualifies as a like-kind exchange for both B and A. 
C) The transaction qualifies as a like-kind exchange for A but not for B. 
D) The transaction does not qualify as a like-kind exchange for either B or A. 
A) The transaction qualifies as a like-kind exchange for B but not for A. 
B) The transaction qualifies as a like-kind exchange for both B and A. 
C) The transaction qualifies as a like-kind exchange for A but not for B. 
D) The transaction does not qualify as a like-kind exchange for either B or A.

Question 17

An investor exchanges an office building located in Niagara Falls,NY for an office building located in Niagara Falls,Ontario.The exchange does not qualify as like-kind.

Accepted Answer

A) True 
 B)False

Question 18

In order for the gain on the sale of a personal residence to be excluded under Section 121,a replacement residence must be purchased within two years.

Accepted Answer

A) True 
 B)False

Question 19

If real property used in a trade or business or held for investment is condemned,it must be replaced with property having a similar functional use.

Accepted Answer

A) True 
 B)False

Question 20

Patricia exchanges office equipment with an adjusted basis of $20,000 for $5,000 cash and office equipment with a fair market value of $12,000.
a.What is the gain or loss recognized?
b.What is the adjusted basis of the new office equipment?

Accepted Answer

a.There is no loss recognized as it is a

The holding period for boot property received begins on the day after the date of the exchange.

If the threat of condemnation exists and the taxpayer has reasonable grounds to believe that the property will be condemned,the taxpayer may elect to defer gain even if the taxpayer sells the property to a party other than the governmental unit that is threatening to condemn the property.

The exchange of a partnership interest for an interest in another partnership qualifies as a like-kind exchange.

A loss on the sale of a taxpayer's personal residence is deductible if the taxpayer owned and lived in the home for two of five years.

Ed owns a racehorse with a $600,000 basis used for breeding purposes.The racehorse is killed in a tornado,and Ed collects $1,000,000 from the insurance company.He purchases another horse for $550,000.What is the amount of gain recognized on the transaction?

If the taxpayer elects to defer the gain on an involuntary conversion,the holding period of the replacement property begins on the date of purchase.

All or part of gain realized on an involuntary conversion is deferred but not permanently excluded if qualifying replacement property is acquired within the requisite period of time.

If property is involuntarily converted into similar property,the basis and holding period of the converted property carry over to the basis and holding period of the replacement property.

Which of the following statements is false with regard to the ownership and use tests under Sec.121?

Generally,a full exclusion of gain under Sec.121 upon the sale of a personal residence applies to only one sale or exchange every

Realized gain or loss must be recognized unless a specific Code section provides for nonrecognition treatment.

Which of the following statements regarding involuntary conversions is incorrect?

An investor exchanges an office building located in Niagara Falls,NY for an office building located in Niagara Falls,Ontario.The exchange does not qualify as like-kind.

In order for the gain on the sale of a personal residence to be excluded under Section 121,a replacement residence must be purchased within two years.

If real property used in a trade or business or held for investment is condemned,it must be replaced with property having a similar functional use.

Patricia exchanges office equipment with an adjusted basis of $20,000 for $5,000 cash and office equipment with a fair market value of $12,000. a.What is the gain or loss recognized? b.What is the adjusted basis of the new office equipment?

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

The holding period for boot property received begins on the day after the date of the exchange.

If the threat of condemnation exists and the taxpayer has reasonable grounds to believe that the property will be condemned,the taxpayer may elect to defer gain even if the taxpayer sells the property to a party other than the governmental unit that is threatening to condemn the property.

The exchange of a partnership interest for an interest in another partnership qualifies as a like-kind exchange.

A loss on the sale of a taxpayer's personal residence is deductible if the taxpayer owned and lived in the home for two of five years.

Ed owns a racehorse with a $600,000 basis used for breeding purposes.The racehorse is killed in a tornado,and Ed collects $1,000,000 from the insurance company.He purchases another horse for $550,000.What is the amount of gain recognized on the transaction?

If the taxpayer elects to defer the gain on an involuntary conversion,the holding period of the replacement property begins on the date of purchase.

All or part of gain realized on an involuntary conversion is deferred but not permanently excluded if qualifying replacement property is acquired within the requisite period of time.

If property is involuntarily converted into similar property,the basis and holding period of the converted property carry over to the basis and holding period of the replacement property.

Which of the following statements is false with regard to the ownership and use tests under Sec.121?

Generally,a full exclusion of gain under Sec.121 upon the sale of a personal residence applies to only one sale or exchange every

Realized gain or loss must be recognized unless a specific Code section provides for nonrecognition treatment.

Which of the following statements regarding involuntary conversions is incorrect?

An investor exchanges an office building located in Niagara Falls,NY for an office building located in Niagara Falls,Ontario.The exchange does not qualify as like-kind.

In order for the gain on the sale of a personal residence to be excluded under Section 121,a replacement residence must be purchased within two years.

If real property used in a trade or business or held for investment is condemned,it must be replaced with property having a similar functional use.

Patricia exchanges office equipment with an adjusted basis of $20,000 for $5,000 cash and office equipment with a fair market value of $12,000. a.What is the gain or loss recognized? b.What is the adjusted basis of the new office equipment?

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