Exam 24: Property Transactions: Nontaxable Exchanges

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

Landry exchanged land with an adjusted basis of $50,000 for another parcel of land worth $35,000 plus $10,000 of cash.Landry held the original land for investment purposes and will do the same with the new parcel.Due to the exchange,Landry will recognize

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?

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

If a gain is realized on the involuntary conversion of property,the gain may be deferred if qualifying replacement property is acquired within a specified time period at a cost equal to or greater than the amount realized on the involuntary conversion.

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.

Which of the following is not an unforeseen circumstance for purposes of obtaining a partial exclusion of a gain on the sale of a home?

Amber receives a residence ($750,000 FMV,$500,000 adjusted basis)owned for eight years by Jonathan,her former spouse,as part of a divorce settlement.Amber and Jonathan had lived in the home for the four years before the divorce.Seven months after the transfer of the residence,Amber sells it for $790,000.What is the amount of Amber's recognized gain on the sale of the home?

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?

Summer exchanges an office building used in her business for another office building.Summer's office building has a FMV of $250,000 (basis of $180,000). The FMV of the new building is $300,000,and it is subject to a mortgage of $60,000,which is assumed by Summer.Summer also pays the other party $40,000 cash. a.What is the amount of gain realized by Summer? b.What is the amount of gain recognized by Summer? c.What is the basis of the new building to Summer?

Mick owns a racehorse with a $500,000 basis used for breeding purposes.The racehorse is killed in an accident and Mick receives $750,000 from the insurance company.Mick purchases another racehorse for $400,000. a.What is the amount of Mick's realized gain? b.What is the amount of Mick's recognized gain?

Daniella exchanges business equipment with a $100,000 adjusted basis for $10,000 cash and business equipment with a $96,000 FMV.What is the amount of gain recognized on the exchange?

In a nontaxable exchange,Henri traded in a truck having an adjusted basis of $8,500 and a FMV of $10,000,for a new truck having a FMV of $15,000.In addition,Henri paid cash of $5,000.What is Henri's basis in the new truck?

Ron's building,which was used in his business,was destroyed in a fire.Ron's adjusted basis in the building was $210,000,and its FMV was $330,000.Ron filed an insurance claim and was reimbursed $300,000.In that same year,Ron invested $240,000 of the insurance proceeds in another business building.Ron's basis in the new building is

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.