Exam 12: Nonrecognition Transactions

Rebecca trades in her four-wheel drive truck for a new one.Rebecca's truck cost $20,000 and has an $8,000 basis on the date of the trade-in.The price of the new truck is $27,000 and the dealer gives Rebecca a $10,000 trade in allowance on her old truck.She uses the trucks in her business.What is Rebecca's basis in the new truck?

Wendell owns 115 acres of land with a fair market value of $57,000.He purchased the land as an investment for $35,000 in 1993.Wendell trades the land for a 122-acre parcel adjacent to other property he owns.The 122 acres has a value of $57,000,and the exchange qualifies for like-kind deferral treatment.What is Wendell's recognized gain on the exchange?

Which of the following qualify as a like-kind exchange? -Land in London,England for land in San Francisco,California.

A fire destroyed Josh's Scuba Shop.The business had an adjusted basis of $500,000 and a fair market value of $600,000.Josh received $550,000 from the insurance company and used the cash to go to HawaiI.I.Josh has a realized gain of $100,000. II)Josh has a recognized gain of $50,000. ​

A fire destroys David's business building that cost $200,000 in 2005 and had an adjusted basis of $160,000.David's insurance company reimburses him $250,000 for his loss.David promptly reconstructs the building for $230,000. a.What is the amount and the character of David's minimum recognized gain (loss)? b.What is the basis of David's new building?

Which of the following qualify as a like-kind exchange? -Land held as an investment for an office building and land used in a business.

An involuntary conversion occurs whenever a loss (but not a gain)is realized from a transaction that occurs against the taxpayer's will.

The holding period of an asset received in a like-kind exchange includes the holding period of the transferred asset.

Which of the following is/are correct regarding the deferral of gain attributable to the involuntary conversion of personal property (personality)? I.Gain deferral is mandatory. II.Replacement property must be acquired within one year of the close of the tax year in which gain is realized from an involuntary property damage conversion. ​

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.How much boot does Rosilyn receive in the transaction?

Which of the following qualifies as a like-kind exchange of property? I.Inventory for inventory. II.Office equipment for a delivery van. ​

The general mechanism used to defer gains and losses from a transaction includes certain adjustments to the basis of the replacement property.These adjustments include I.subtracting deferred losses. II.adding deferred gains. ​

Rosilyn trades her old business-use luxury car with an adjusted basis of $13,000 and an outstanding loan liability balance of $2,000 for a new business-use economy 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 amount realized on the transaction?

The earliest date that condemned property can be replaced and still qualify for involuntary conversion (nonrecognition)treatment is

Which of the following qualify as a like-kind exchange? -A business use automobile for a personal use automobile.

Jason and Mark exchange equipment each use in their business.In the trade,Jason receives Mark's equipment that is worth $20,000.Mark also assumes the $10,000 loan Jason had on the equipment.Jason purchased his equipment for $25,000 and had taken $12,000 of depreciation on the equipment up to the date of the exchange.Mark's adjusted basis in his equipment is $16,000 on the date of the exchange. a.What is Jason's realized gain on the exchange? b.What are the amount and the character of the gain Jason must recognize on the exchange? c.What is Jason's basis in the equipment acquired in the exchange?

Which of the following qualify as a like-kind exchange? -Inventory for inventory.

Classification of a nonrecognition transaction as a continuation of an investment requires a qualified replacement asset.

Which of the following can be income deferral transactions? I.Sale of municipal bonds. II.Involuntary conversions of property. ​

Randy owns 115 acres of land with a fair market value of $57,000.He purchased the land as an investment for $35,000 in 1993.Randy trades the land for a 122-acre parcel adjacent to other property he owns.The 122 acres has a value of $57,000,and the exchange qualifies for like-kind deferral treatment.What is Randy's realized gain on the exchange?