Exam 15: Property Transactions: Nontaxable Exchanges

Discuss the relationship between realized gain and boot received in a § 1031 like-kind exchange.

Butch sells land with an adjusted basis of $88,000 and a fair market value of $160,000 to Cynthia,his wife,for $160,000.Discuss how the tax consequences would differ if Butch and Cynthia had never been married.

Under the taxpayer-use test for a § 1033 involuntary conversion,the taxpayer has less flexibility in qualifying replacement property than under the functional-use test.

Maud exchanges a rental house at the beach with an adjusted basis of $475,000 and a fair market value of $460,000 for a rental house at the mountains with a fair market value of $400,000 and cash of $60,000.What is the recognized gain or loss?

The exchange of unimproved real property located in Topeka (KS)for improved real property located in Atlanta (GA)does not qualify as a like-kind exchange.

If a taxpayer exchanges like-kind property under § 1031 and assumes a liability associated with the property received,the taxpayer is considered to have given boot in the transaction.

Taxpayer owns a home in Atlanta.His company transfers him to Chicago on January 2,2012,and he sells the Atlanta house in early February.He purchases a residence in Chicago on February 3,2012.On December 15,2012,taxpayer's company transfers him to Los Angeles.In January 2013,he sells the Chicago residence and purchases a residence in Los Angeles.Because multiple sales have occurred within a two-year period,§ 121 treatment does not apply to the sale of the second home.

Which of the following types of transactions qualify for nonrecognition treatment?

Brett owns investment land located in Tucson,Arizona.He exchanges it for other investment land.In which of the following locations may the other investment land be located and enable Brett to qualify for § 1031 like-kind exchange treatment?

To qualify as a like-kind exchange,real property must be exchanged either for other real property or for personal property with a statutory life of at least 39 years.

Larry,who lived in Maine,acquired a personal residence eight years ago when he was 42 years old.During this period he has occupied the residence for only nine months (out of 12)each year due to winter vacations in Florida.Is Larry eligible for exclusion of gain under § 121?

Sammy exchanges equipment used in his business in a like-kind exchange.The property exchanged is as follows: The other party assumes the liability.

In determining the basis of like-kind property received,postponed losses are:

Pierce exchanges an asset (adjusted basis of $14,000; fair market value of $18,000)for another asset (fair market value of $15,000).In addition,he receives cash of $3,000.If the exchange qualifies as a like-kind exchange,his recognized gain is $3,000 and his adjusted basis for the property received is $17,000 ($14,000 + $3,000 recognized gain).

Which of the following exchanges qualifies for nonrecognition treatment as a § 1031 like-kind exchange?

The nonrecognition of gains and losses under § 1031 is mandatory for gains and elective for losses.

What types of exchanges of insurance contracts are eligible for nonrecognition treatment under § 1035?

Section 1033 (nonrecognition of gain from an involuntary conversion)applies to both gains and losses.

Gabe's office building (adjusted basis of $430,000; fair market value of $500,000)is destroyed by a hurricane.Due to a 20% co-insurance clause,Gabe receives insurance proceeds of only $400,000.If Gabe purchases an office building for $500,000 one month later,its adjusted basis is $530,000 ($500,000 cost + $30,000 postponed loss).