Exam 24: Property Transactions: Nontaxable Exchanges

Stephanie's building,which was used in her business,was destroyed in a fire.Stephanie's adjusted basis in the building was $175,000,and its FMV was $210,000.Stephanie filed an insurance claim and was reimbursed $200,000.In that same year,Stephanie invested $180,000 of the insurance proceeds in another business building.Assuming the proper election is made to defer gain,Stephanie's basis in the new building will be

The building used in Terry's business was condemned by the city of St.Louis.Terry received a condemnation award of $125,000.He paid $1,200 in lawyer's fees and $800 for an appraisal of the property.Terry's adjusted basis in the building was $60,000.Terry reinvests in similar property costing $110,000,and Terry makes the proper election regarding the property.What is the amount of Terry's recognized gain on the condemnation?

Bobbie exchanges business equipment (adjusted basis $160,000)for other business equipment that has a FMV of $140,000.Bobbie also receives $30,000 cash.Bobbie's basis in the new equipment is

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?

Sometimes taxpayers should structure a transaction to avoid the application of like-kind provisions.Which of the following conditions is likely to cause a taxpayer to avoid like-kind treatment?

In a like-kind exchange,both the property transferred and the property received must be held by the taxpayer either for productive use in a trade or business or for investment.

Nicki is single and 46 years old.She sells her principal residence (adjusted basis $200,000)that she purchased ten years ago for $435,000. a.What is the amount of Nicki's recognized gain on the sale? b.Assume instead that Nicki sells the residence for $485,000.What is the amount of Nicki's recognized gain on the sale? c.Assume instead that Nicki has been married to Mike for the entire time they have owned and lived in the home.If they sell the home for $485,000,what is the amount of their recognized gain on the sale?

In 1997,Paige paid $200,000 to purchase a new residence.She paid a realtor $5,000 to help locate the house and paid legal fees of $3,000 to make certain that the seller had legal title to the property.Under the provisions of tax law in effect at the time of the purchase,she deferred a gain of $30,000 from the sale of a former residence in 1996.In 1999,she added a new porch to the house at a cost of $15,000 and installed central air conditioning at a cost of $12,000.Since purchasing the house,she has paid $2,000 in repairs.What is the adjusted basis of the home?

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

An exchange of inventory for inventory of a like kind qualifies as a like-kind exchange.

Marinda exchanges an office building worth $800,000 (basis is $820,000)for a warehouse worth $850,000. A part of the exchange she also transfers $50,000 worth of securities which she purchased for $40,000. a.What are Marinda's realized and recognized gains (losses)on the two assets exchanged? b.What is Marinda's basis in the warehouse acquired?

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

Juan's business delivery truck is destroyed in an accident.He paid $40,000 for the truck,and $30,000 of depreciation has been deducted during its period of use.The insurance company pays Juan $32,000 due to the accident.What is the minimum amount that Juan must spend on a new truck to avoid any gain recognition?

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

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

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?

Discuss the rules regarding the holding period for like-kind property received in a nontaxable exchange.

William and Kate married in 2014 and purchased a new home together.Each had owned and lived in separate residences for the past 5 years.William's adjusted basis in his old residence was $200,000; Kate's adjusted basis in her old residence was $120,000.In late 2014,William sells his residence for $500,000 while Kate sells her residence for $190,000.What is the total gain to be excluded from these transactions in 2014?

Which of the following statements with respect to a like-kind exchange is false?

A taxpayer may elect to defer recognition of a loss resulting from an involuntary conversion.