Question 1

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 2

The basis of non-like-kind property received is the basis in the hands of the transferor at the date of the exchange.

Accepted Answer

A) True 
 B)False

Question 3

Indicate with a "yes" or a "no" which of the following are like-kind exchanges (assume all assets are held for business or investment purposes).
a.Exchange of common stock held as an investment for land held as an investment.
b.Exchange of farmland for an apartment building.
c.Exchange of office furniture used in trade or business for computer used in a trade or business
d.Exchange of unimproved real estate for improved real estate.
e.Exchange of automobile used in trade or business for office building used in trade or business

Accepted Answer

a.No; b.Ye

Question 4

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 5

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 6

Kai owns an apartment building held for investment purposes. The apartment building is worth $500,000,although it is subject to a mortgage of $100,000. Kai's basis in the apartment building is $380,000. Kai exchanges the apartment building for an office building. The office building has an FMV of $350,000.Kai receives $50,000 cash in addition to receiving the office building,and the other party assumes the apartment building mortgage.What is Kai's recognized gain on this exchange?

Accepted Answer

A) $0 
B) $50,000 
C) $120,000 
D) $150,000 
A) $0 
B) $50,000 
C) $120,000 
D) $150,000

Question 7

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 8

Indicate with a "yes" or a "no" which of the following are like-kind exchanges.
a.Computer used in trade or business for office furniture used in trade or business.
b.Apartment building held as an investment for an office building used in trade or business.
c.Land used in trade or business for equipment used in trade or business.
d.Printer used in trade or business for printer used for personal purposes.
e.Exchange of improved real estate held for investment for unimproved real estate held for investment.

Accepted Answer

a.No; b.Ye

Question 9

If related taxpayers exchange property qualifying for a like-kind exchange,the properties must be retained for three years after the exchange to prevent recognition of gain resulting from the original exchange on a subsequent disposition of the property.

Accepted Answer

A) True 
 B)False

Question 10

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 11

Real property exchanged for personal property qualifies as a like-kind exchange.

Accepted Answer

A) True 
 B)False

Question 12

A sale of property and subsequent purchase of like-kind property may be treated as a like-kind exchange if the two transactions are interdependent.

Accepted Answer

A) True 
 B)False

Question 13

If a taxpayer owns more than one home,she can designate the home that will be considered her principal residence for purposes of the Sec.121 exclusion.

Accepted Answer

A) True 
 B)False

Question 14

Alex owns an office building which the state condemns on January 15,2014.Alex receives the condemnation award on April 1,2014. 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 15,2016 
B) January 15,2017 
C) December 31,2016 
D) December 31,2017 
A) January 15,2016 
B) January 15,2017 
C) December 31,2016 
D) December 31,2017

Question 15

The Smiths owned and used their principal residence,with an adjusted basis of $250,000,for ten years.The house is destroyed by a tornado and the Smiths receive insurance proceeds of $800,000.Six months later,they purchase another residence for $850,000.
a.What is the amount of gain the Smiths must recognize?
b.What is the basis of the new residence?

Accepted Answer

@#IMG-DLM& b.Basis of new home

Question 16

In the case of married taxpayers,an individual may claim the Sec.121 exclusion even if the individual's spouse used the exclusion within the past two years.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

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 (e.g.a personal use car)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 (e.g.a personal use car)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 19

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 20

Bob and Elizabeth,both 55 years old and married,sell their personal residence to Wolfgang.Wolfgang pays $660,000 and assumes their $90,000 mortgage.To make the sale they pay $20,000 in commissions and $10,000 in legal costs.They have owned and lived in the house for seven years and their tax basis is $200,000.What is the amount of gain recognized on the sale?

Accepted Answer

A) $0 
B) $20,000 
C) $50,000 
D) $520,000 
A) $0 
B) $20,000 
C) $50,000 
D) $520,000

Exam 24: Property Transactions: Nontaxable Exchanges

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

The basis of non-like-kind property received is the basis in the hands of the transferor at the date of the exchange.

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

Which of the following statements regarding involuntary conversions is incorrect?

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 related taxpayers exchange property qualifying for a like-kind exchange,the properties must be retained for three years after the exchange to prevent recognition of gain resulting from the original exchange on a subsequent disposition of the property.

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.

Real property exchanged for personal property qualifies as a like-kind exchange.

A sale of property and subsequent purchase of like-kind property may be treated as a like-kind exchange if the two transactions are interdependent.

If a taxpayer owns more than one home,she can designate the home that will be considered her principal residence for purposes of the Sec.121 exclusion.

Alex owns an office building which the state condemns on January 15,2014.Alex receives the condemnation award on April 1,2014. In order to qualify for nonrecognition of gain on this involuntary conversion,what is the last date for Alex to acquire qualified replacement property?

In the case of married taxpayers,an individual may claim the Sec.121 exclusion even if the individual's spouse used the exclusion within the past two years.

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

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

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.

Tax Research

an Introduction to Taxation

Corporate Formations and Capital Structure

I: Determination of Tax

The Corporate Income Tax

Gross Income: Inclusions

Corporate Nonliquidating Distributions

Gross Income: Exclusions

Other Corporate Tax Levies

Property Transactions: Capital Gains and Losses

Corporate Liquidating Distributions

Deductions and Losses

Corporate Acquisitions and Reorganizations

Itemized Deductions

Consolidated Tax Returns

Losses and Bad Debts

Partnership Formation and Operation

Employee Expenses and Deferred Compensation

Special Partnership Issues

Depreciation cost Recovery amortization and Depletion

S Corporations

Accounting Periods and Methods

The Gift Tax

The Estate Tax

Property Transactions: Section 1231 and Recapture

Income Taxation of Trusts and Estates

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

Administrative Procedures

Filters