Question 1

The recognition of a loss realized on an involuntary conversion is mandatory.

Accepted Answer

A) True 
 B)False

Question 2

Rosilyn trades her old business-use car with an adjusted basis of $13,000 and an outstanding loan liability balance of $2,000 for a new business-use car valued at $9,000 plus $3,000 cash from Bob's Auto Sales and Loan Company.Bob assumes Rosilyn's loan balance.What is Rosilyn's basis in her new car?

Accepted Answer

A) $- 0 - 
B) $9,000 
C) $11,000 
D) $12,000 
E) $14,000 
A) $- 0 - 
B) $9,000 
C) $11,000 
D) $12,000 
E) $14,000

Question 3

Natural Power Corporation owns a warehouse with an adjusted basis of $195,000 and an appraised fair market value of $185,000.The city of Springfield condemns the property for a new airport.The condemnation award is $185,000.Natural Power invests the $185,000 in a new warehouse on the other side of the city.What is the gain or loss that Natural Power Corporation must recognize due to the transactions?

Accepted Answer

A) No gain or loss 
B) $10,000 gain 
C) $10,000 loss 
D) $185,000 gain 
A) No gain or loss 
B) $10,000 gain 
C) $10,000 loss 
D) $185,000 gain

Question 4

Which of the following qualify as a like-kind exchange?
-An airplane for a duplex apartment.

Accepted Answer

A) qualifies as a like-kind exchange 
B) does not qualify as a like-kind exchange 
A) qualifies as a like-kind exchange 
B) does not qualify as a like-kind exchange

Question 5

Cindy exchanges investment real estate with Russell.Cindy purchased her realty two years ago for $280,000,and it is encumbered by a mortgage of $100,000 and has a fair market value of $320,000 when exchanged.Russell paid $80,000 cash for his property in 1999 and it is appraised at $150,000 on the day of the exchange.Russell assumes the debt on his new land and pays Cindy enough in cash to balance the exchange.What is Cindy's recognized gain (loss)on the exchange?

Accepted Answer

A) $-0- 
B) $40,000 
C) $100,000 
D) $170,000 
A) $-0- 
B) $40,000 
C) $100,000 
D) $170,000

Question 6

Donald and Candice sell their home for $695,000,incurring selling expenses of $30,000.They purchased the residence for $125,000 and made capital improvements totaling $20,000 during the 20 years they lived there.What is their realized gain and recognized gain on the sale?
​
Realized Recognized

Accepted Answer

A) $665,000 $20,000 
B) $520,000 $-0- 
C) $520,000 $20,000 
D) $540,000 $40,000 
E) $520,000 $270,000 
A) $665,000 $20,000 
B) $520,000 $-0- 
C) $520,000 $20,000 
D) $540,000 $40,000 
E) $520,000 $270,000

Question 7

Which of the tax concept(s)allow for the deferral of gains on nonrecognition transactions?
I.Capital Recovery Concept.
II.Ability to Pay Concept.
​

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Question 8

No taxable gain or loss is recognized on a like-kind exchange of an investment asset for a similar asset that will be held for investment if both assets consist of

Accepted Answer

A) Partnership interests. 
B) Convertible debentures. 
C) Mortgage notes 
D) Rental real estate located in different states. 
E) Common stock of companies in the same industry. 
A) Partnership interests. 
B) Convertible debentures. 
C) Mortgage notes 
D) Rental real estate located in different states. 
E) Common stock of companies in the same industry.

Question 9

Rosilyn trades her old business-use car with an adjusted basis of $13,000 and an outstanding loan liability balance of $2,000 for a new business-use car valued at $9,000 plus $3,000 cash from Bob's Auto Sales and Loan Company.Bob assumes Rosilyn's loan balance.What is Rosilyn's recognized gain on the transaction?

Accepted Answer

A) $- 0 - 
B) $1,000 
C) $2,000 
D) $3,000 
E) $5,000 
A) $- 0 - 
B) $1,000 
C) $2,000 
D) $3,000 
E) $5,000

Question 10

Justin trades an office building located in Michigan to John for an apartment complex located in North Carolina.Details of the two properties:
In addition,John pays Justin $3,000,000 cash as part of this transaction.What is the gain (loss)recognized by John in this transaction and what is his basis in the Michigan property?
Gain Recognized Adjusted Basis

Accepted Answer

A) $1,000,000 $9,000,000 
B) $ -0- $8,000,000 
C) $1,000,000 $6,000,000 
D) $ -0- $9,000,000 
E) Some other amounts 
A) $1,000,000 $9,000,000 
B) $ -0- $8,000,000 
C) $1,000,000 $6,000,000 
D) $ -0- $9,000,000 
E) Some other amounts

Question 11

A gain on a like-kind exchange is always recognized to the extent of any boot received.

Accepted Answer

A) True 
 B)False

Question 12

Charlotte's apartment building that has an adjusted basis of $200,000 is destroyed by fire.Early the following year,Charlotte receives a $425,000 insurance check and reinvests $400,000 of the proceeds in an apartment building.What is the basis in the new building?

Accepted Answer

A) $- 0 - 
B) $425,000 
C) $400,000 
D) $200,000 
E) $175,000 
A) $- 0 - 
B) $425,000 
C) $400,000 
D) $200,000 
E) $175,000

Question 13

Rationale for nonrecognition of property transactions exists because of which concept(s)of taxation?
I.Wherewithal-to-Pay Concept.
II.Constructive receipt Doctrine.
​

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Question 14

Tony and Faith sell their home for $495,000,incurring selling expenses of $25,000.They purchased the residence for $85,000 and made capital improvements totaling $20,000 during the 20 years they lived there.What is their realized gain and recognized gain on the sale?
​
Realized Recognized

Accepted Answer

A) $365,000 $-0- 
B) $365,000 $115,000 
C) $385,000 $135,000 
D) $385,000 $-0- 
E) $390,000 $-0- 
A) $365,000 $-0- 
B) $365,000 $115,000 
C) $385,000 $135,000 
D) $385,000 $-0- 
E) $390,000 $-0-

Question 15

Benito owns an office building he purchased five years ago at a cost of $600,000.The property is currently worth $800,000,has an adjusted basis of $300,000 and is encumbered by a $400,000 mortgage.
Mitch owns an apartment complex he purchased three years ago at a cost of $600,000.The property is currently worth $750,000,has an adjusted basis of $500,000 and is encumbered by a $325,000 mortgage.
Benito and Mitch would like to exchange the properties and their respective mortgages.Answer the following questions regarding the exchange.
a.Any boot is to be paid in cash.Who must pay the boot and how much must be paid?
b.Does Benito have to recognize any gain on the exchange? If so,indicate the amount of gain to be recognized and why it must be recognized.

Accepted Answer

The answer of Benito owns an office building he purchased...

Question 16

Robbie and Mike exchange machinery in a qualified like-kind exchange.Robbie's old machine,which originally cost $42,000,has an adjusted basis of $26,000.His old machine is worth $32,000.Since the machine Mike is trading is worth only $27,000 (Mike's basis is $18,000),Mike will even up the exchange by giving Robbie $5,000 in cash.
a.What is Robbie's realized gain (loss)on the machine?
b.What is Robbie's recognized gain (loss)on the machine?
c.What is the character of Robbie's gain or loss on the machine?
d.What is Robbie's basis in his new machine?

Accepted Answer

The answer of Robbie and Mike exchange machinery in a...

Question 17

Which of the following qualifies as a like-kind exchange of property?
I.Registered trademark for a copyright.
II.A 2009 Chevy,business-use automobile for a 2010 Ford,business-use automobile
​

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Question 18

A fire destroyed Jimmy's Teeshirt Shop.The business had an adjusted basis of $500,000 and a fair market value of $600,000 before the fire.Jimmy received $550,000 from the insurance company and opened a new Teeshirt Shop with the proceeds.
I.Jimmy has a realized gain of $50,000.
II.Jimmy has a recognized gain of $50,000.
​

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Question 19

Rosilyn trades her old business-use car with an adjusted basis of $13,000 and an outstanding loan liability balance of $2,000 for a new business-use car valued at $9,000 plus $3,000 cash from Bob's Auto Sales and Loan Company.Bob assumes Rosilyn's loan balance.What is Rosilyn's realized gain on the transaction?

Accepted Answer

A) $- 0 - 
B) $1,000 
C) $2,000 
D) $3,000 
E) $5,000 
A) $- 0 - 
B) $1,000 
C) $2,000 
D) $3,000 
E) $5,000

Question 20

Which of the following can be income deferral transactions?
I.Exchanges of like-kind property.
II.Involuntary conversions of property.
​

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

The recognition of a loss realized on an involuntary conversion is mandatory.

Rosilyn trades her old business-use car with an adjusted basis of $13,000 and an outstanding loan liability balance of $2,000 for a new business-use car valued at $9,000 plus $3,000 cash from Bob's Auto Sales and Loan Company.Bob assumes Rosilyn's loan balance.What is Rosilyn's basis in her new car?

Which of the following qualify as a like-kind exchange? -An airplane for a duplex apartment.

Donald and Candice sell their home for $695,000,incurring selling expenses of $30,000.They purchased the residence for $125,000 and made capital improvements totaling $20,000 during the 20 years they lived there.What is their realized gain and recognized gain on the sale? Realized Recognized

Which of the tax concept(s)allow for the deferral of gains on nonrecognition transactions? I.Capital Recovery Concept. II.Ability to Pay Concept.

No taxable gain or loss is recognized on a like-kind exchange of an investment asset for a similar asset that will be held for investment if both assets consist of

A gain on a like-kind exchange is always recognized to the extent of any boot received.

Charlotte's apartment building that has an adjusted basis of $200,000 is destroyed by fire.Early the following year,Charlotte receives a $425,000 insurance check and reinvests $400,000 of the proceeds in an apartment building.What is the basis in the new building?

Rationale for nonrecognition of property transactions exists because of which concept(s)of taxation? I.Wherewithal-to-Pay Concept. II.Constructive receipt Doctrine.

Tony and Faith sell their home for $495,000,incurring selling expenses of $25,000.They purchased the residence for $85,000 and made capital improvements totaling $20,000 during the 20 years they lived there.What is their realized gain and recognized gain on the sale? Realized Recognized

Which of the following qualifies as a like-kind exchange of property? I.Registered trademark for a copyright. II.A 2009 Chevy,business-use automobile for a 2010 Ford,business-use automobile

Which of the following can be income deferral transactions? I.Exchanges of like-kind property. II.Involuntary conversions of property.

Conceptual Foundations of Tax Law

Income Tax Concepts

Income Sources

Income Exclusions

Introduction to Business Expenses

Business Expenses

Losses -- Deductions and Limitations

Taxation of Individuals

Acquisitions of Property

Cost Recovery on Property: Depreciation, depletion, and Amortization

Property Dispositions

Choice of Business Entity -- General Tax and Nontax Factorsformation

Choice of Business Entity -- Operations and Distributions

Choice of Business Entity -- Other Considerations

Tax Research

Filters

Exam 12: Nonrecognition Transactions

The recognition of a loss realized on an involuntary conversion is mandatory.

Which of the following qualify as a like-kind exchange? -An airplane for a duplex apartment.

Donald and Candice sell their home for $695,000,incurring selling expenses of $30,000.They purchased the residence for $125,000 and made capital improvements totaling $20,000 during the 20 years they lived there.What is their realized gain and recognized gain on the sale? ​ Realized Recognized

Which of the tax concept(s)allow for the deferral of gains on nonrecognition transactions? I.Capital Recovery Concept. II.Ability to Pay Concept. ​

No taxable gain or loss is recognized on a like-kind exchange of an investment asset for a similar asset that will be held for investment if both assets consist of

A gain on a like-kind exchange is always recognized to the extent of any boot received.

Charlotte's apartment building that has an adjusted basis of $200,000 is destroyed by fire.Early the following year,Charlotte receives a $425,000 insurance check and reinvests $400,000 of the proceeds in an apartment building.What is the basis in the new building?

Rationale for nonrecognition of property transactions exists because of which concept(s)of taxation? I.Wherewithal-to-Pay Concept. II.Constructive receipt Doctrine. ​

Tony and Faith sell their home for $495,000,incurring selling expenses of $25,000.They purchased the residence for $85,000 and made capital improvements totaling $20,000 during the 20 years they lived there.What is their realized gain and recognized gain on the sale? ​ Realized Recognized

Which of the following qualifies as a like-kind exchange of property? I.Registered trademark for a copyright. II.A 2009 Chevy,business-use automobile for a 2010 Ford,business-use automobile ​

Which of the following can be income deferral transactions? I.Exchanges of like-kind property. II.Involuntary conversions of property. ​

Conceptual Foundations of Tax Law

Income Tax Concepts

Income Sources

Income Exclusions

Introduction to Business Expenses

Business Expenses

Losses -- Deductions and Limitations

Taxation of Individuals

Acquisitions of Property

Cost Recovery on Property: Depreciation, depletion, and Amortization

Property Dispositions

Choice of Business Entity -- General Tax and Nontax Factorsformation

Choice of Business Entity -- Operations and Distributions

Choice of Business Entity -- Other Considerations

Tax Research

Filters

Donald and Candice sell their home for $695,000,incurring selling expenses of $30,000.They purchased the residence for $125,000 and made capital improvements totaling $20,000 during the 20 years they lived there.What is their realized gain and recognized gain on the sale? Realized Recognized

Which of the tax concept(s)allow for the deferral of gains on nonrecognition transactions? I.Capital Recovery Concept. II.Ability to Pay Concept.

Rationale for nonrecognition of property transactions exists because of which concept(s)of taxation? I.Wherewithal-to-Pay Concept. II.Constructive receipt Doctrine.

Tony and Faith sell their home for $495,000,incurring selling expenses of $25,000.They purchased the residence for $85,000 and made capital improvements totaling $20,000 during the 20 years they lived there.What is their realized gain and recognized gain on the sale? Realized Recognized

Which of the following qualifies as a like-kind exchange of property? I.Registered trademark for a copyright. II.A 2009 Chevy,business-use automobile for a 2010 Ford,business-use automobile

Which of the following can be income deferral transactions? I.Exchanges of like-kind property. II.Involuntary conversions of property.