Exam 24: Property Transactions: Nontaxable Exchanges

Vector Inc.'s office building burns down on October 31,2014. Vector,a calendar year taxpayer,finally settles with the insurance company on February 3,2015. In order to defer the gain realized on the building,Vector must acquire another office building by February 3,2017.

Trent,who is in the business of racing horses,exchanges a racehorse with a basis of $80,000 for $40,000 cash and a trotter (another racehorse)with a $150,000 fair market value. a.What is the amount of gain realized by Trent? b.What is the amount of gain recognized by Trent? c.What is the adjusted basis of the trotter?

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.

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 realized? b.What is the gain or loss recognized? c. What is the adjusted basis of the new office equipment?

Pierce,a single person age 60,sold his home this year.He had lived in the house for 10 years.He signed a contract on March 4 to sell his home. Based on these facts,what is the amount of his recognized gain?

Ike and Tina married and moved into their new home (purchase price $800,000)18 months ago.They are thinking of selling the home which is now worth $1,300,000.They plan to reinvest in a smaller home costing approximately $600,000.What should they consider before selling their home?

Laurie owns land held for investment.The land's FMV is $150,000.Laurie's basis in the land is $130,000. Laurie exchanges the land,plus $20,000 of cash,for a warehouse owned by Trey.The warehouse is worth $210,000,but is subject to a mortgage of $40,000 which Laurie will assume.Trey's basis in the warehouse is $120,000.Laurie's basis in the warehouse received will be

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

Kareem's office building is destroyed by fire on April 11,2014. Settlement is reached with the insurance company on November 1,2014 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.

Dean exchanges business equipment with a $120,000 adjusted basis for $40,000 cash and business equipment with a $140,000 FMV.What is the amount of gain which Dean recognizes on the exchange?

Amelia exchanges an office building with a $350,000 adjusted basis for an airplane with a $560,000 fair market value to be used in business. a.What is the amount of gain or loss realized by Amelia? b.What is the amount of gain or loss recognized by Amelia?

Glen owns a building that is used in business. The building is worth $200,000,but is subject to a mortgage of $40,000. Glen's basis in the building is $120,000. Glen exchanges the building for investment land worth $150,000 plus $10,000 cash. In addition,the other party assumes the mortgage which will be held for investment. Glen must recognize a gain of

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.If the proper election is made,Stephanie will recognize gain of

Jenna,who is single,sold her principal residence on December 1,2013,and excluded the $150,000 gain because she met the ownership and usage requirements under Sec.121.Jenna purchased another residence in Pensacola on January 1,2014 that she occupied until July 1,2014 when she receives a new job offer from an employer in Miami.She sells the Pensacola residence on October 1,2014 and realizes a gain of $40,000.Jenna may exclude what amount of the gain from the sale on October 1,2014?

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

When the cost of replacement property is less than the amount realized on an involuntary conversion,gain will be recognized. The recognized gain will be equal to the amount realized over the cost of the replacement property,but not more than the total realized gain.

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?

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?

Ron and Fay live in Buffalo.They also own a condominium in Orlando (purchased in 2009)which they rent to vacationers.Ron and Fay will be retiring.They plan to live in the Orlando property for two and a half years.When they sell it,they will be able to exclude the full gain which is expected to be about $200,000.

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?