Exam 12: Nonrecognition Transactions

Which of the following is/are correct regarding the sale of a principal residence? I.A taxpayer who is single and fails to meet the ownership or use test due to change in employment is entitled to a pro rata share of the $250,000 exclusion. II.A single taxpayer can exclude up to $250,000 of the gain on the sale of a vacation home. ​

Which of the following is/are correct regarding the sale of a principal residence? I.A single taxpayer can only use the $250,000 exclusion once every 3 years. II.Married taxpayers who both meet the ownership and use tests and file jointly can each exclude $250,000 of gain ($500,000 total)on the sale of their principal residence. ​

Drake and Cynthia sell their home for $475,000,incurring selling expenses of $20,000.They had purchased the residence in 1998 for $105,000 and made capital improvements totaling $25,000.They buy a new residence for $210,000.What is their realized gain and recognized gain on the sale? What is their basis in the new house?

Commonalties of nonrecognition transactions include that I.gains on all transactions must be recognized when the taxpayer has the wherewithal-to-pay. II.tax attributes carryover from the original asset to the replacement asset. ​

Which of the following qualify as a like-kind exchange? -Farm land for an office building and its land.

Charlotte purchases a residence for $105,000 on April 13,2007.On July 1,2015,she marries Howard and they use Charlotte's house as their principal residence.On May 12,2017,they sell their home for $390,000,incurring $20,000 of selling expenses and purchase another residence costing $350,000.What is their realized and recognized gain? ​ Realized Recognized

Which of the following qualify as a like-kind exchange? -Coke-Cola bonds for General Foods bonds.

Matthew exchanges an investment apartment building for a parcel of land.The apartment building has a fair market value of $80,000 and an adjusted basis of $95,000.The land's value is $60,000.Matthew receives $20,000 cash in the exchange.What is Matthew's recognized gain or (loss)on the exchange and his basis in the land? ​ Gain (Loss)Recognized Basis

Roscoe receives real estate appraised at $200,000 and cash of $10,000 from Cathy in exchange for his investment realty with a basis of $170,000.Roscoe plans to hold the new realty for investment.What is his recognized gain?

Which of the following qualify as a like-kind exchange? -Personal residence for an apartment building.

Gain deferral is fundamental to the nonrecognition transactions.In which of the following is gain deferral mandatory? I.Involuntary conversion of business real estate. II.Like-kind exchange of business real estate. ​

Fran owns a commercial office building with a fair market value of $850,000.She purchased the building as an investment for $815,000 in 2006.She has deducted $115,000 in depreciation.Fran trades the building for an apartment complex.The apartment complex has a value of $850,000,and the exchange qualifies for like-kind deferral treatment.What is Fran's recognized gain on the exchange?

Dominic and Lois sell their home for $775,000,incurring selling expenses of $40,000.They had purchased the residence in 1990 for $185,000 and made capital improvements totaling $45,000.They buy a new residence for $310,000.What is their realized gain and recognized gain on the sale? What is their basis in the new house?

For related parties to qualify for a like-kind exchange,the property received must be held for six months.

Under the like-kind exchange rules,when like-kind property is traded for like-kind property,a loss on a trade-in is:

Nancy acquired office equipment for her business three years ago at a cost of $15,000.During the current year,she exchanges the equipment for different equipment with a fair market value of $9,000.MACRS depreciation on the original equipment was $9,828.The exchange qualifies as a like-kind exchange.Immediately after the exchange Nancy sells the new equipment for $9,000 cash.What is the amount and character of the gain recognized?

Which of the following exchanges of property are like-kind exchanges? I.Common stock of Intel traded for preferred stock of Intel. II.Principal residence traded for 20 acres of undeveloped investment land. ​

Grant exchanges an old pizza oven from his business for a new oven.In addition to the old oven,which had a basis of $10,000,Grant pays $4,000 cash and takes out a loan on the new oven for $6,000.The new oven is valued at $22,000.What is Grant's basis in the new oven?

Discuss the type of property that is qualified replacement property for involuntary conversion provisions for gain deferrals.

Daisy's warehouse is destroyed by a tornado.The warehouse has an adjusted basis of $130,000 when destroyed.Daisy receives an insurance reimbursement check for $150,000 and immediately reinvests $120,000 of the proceeds in a new warehouse.What are Daisy's recognized gain or (loss)and her basis in the replacement warehouse? ​ Recognized New Gain (Loss)Basis