Question 1

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

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 B

Question 2

Willie 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.Willie 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 Willie's basis in the new parcel of land?

Accepted Answer

A) $ - 0 - 
B) $17,000 
C) $35,000 
D) $57,000 
E) $74,000 
A) $ - 0 - 
B) $17,000 
C) $35,000 
D) $57,000 
E) $74,000 C

Question 3

Match each statement with the correct term below.
-Wherewithal-to-pay

Accepted Answer

A) Losses are never deferred. 
B) Can be within the same NAICS Code. 
C) Not considered like-kind property. 
D) A taxpayer can have only one at a time. 
E) The maximum amount that can be recognized on a like-kind exchange.
F)This type of exchange must be completed within 180 days of first property transfer.
G)The concept upon which the ability to defer gains on certain nontaxable transactions relies. 
A) Losses are never deferred. 
B) Can be within the same NAICS Code. 
C) Not considered like-kind property. 
D) A taxpayer can have only one at a time. 
E) The maximum amount that can be recognized on a like-kind exchange.
F)This type of exchange must be completed within 180 days of first property transfer.
G)The concept upon which the ability to defer gains on certain nontaxable transactions relies. G

Question 4

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 5

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?

Accepted Answer

A) $ - 0 - 
B) $22,000 
C) $35,000 
D) $57,000 
E) $79,000 
A) $ - 0 - 
B) $22,000 
C) $35,000 
D) $57,000 
E) $79,000

Question 6

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

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 7

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

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 8

Which of the following qualify as a like-kind exchange?
-A personal residence for a vacation home.

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 9

Justin trades an office building located in Michigan to John for an apartment complex located in North Carolina.Details of the two properties:
$\begin{array}{lrr}
&\text { Justin } & \text { John } \
& \underline {\text { Michigan } } & \underline { \text { N. Carolina } } \
\text { Fair market value } &\$ 9,000,000 & \$ 4,000,000 \
\text { Adjusted basis } &3,000,000 & 3,000,000 \
\text { Liabilities transferred with property } &2,000,000 & -0-
\end{array}$
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?
$\begin{array}{ll}
\text { Gain  Recognized } & \text { Adjusted B asis } \
a.\$ 1,000,000 & \$ 9,000,000 \
b.\$-0- & \$ 8,000,000 \
c.\$ 1,000,000 & \$ 6,000,000 \
d.\$-0- & \$ 9,000,000
\end{array}$
e. Some other amounts

Accepted Answer

The answer of Justin trades an office building located in...

Question 10

A flood destroys Franklin's manufacturing facility.The building had a basis of $600,000 when destroyed.Franklin's insurance company reimburses him $850,000,the appraised replacement cost of the building.Franklin purchases a qualified replacement facility for $1,100,000.Discuss the tax effects of these transactions applying the concepts of taxation that drive your answers.

Accepted Answer

Franklin realizes a gain of $250,000 ($8

Question 11

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?

Accepted Answer

a.Jason realizes a gain of $17,000 [($20

Question 12

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 13

Which of the following is/are correct concerning a principal residence?
I.The maximum amount of gain a single taxpayer can exclude on the sale of a principal residence is $500,000.
II.To qualify for a $250,000 exclusion,a single taxpayer must have owned and used the property as a principal residence for at least 2 of the previous 5 years.

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

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.

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 15

When two qualified assets are exchanged and their fair market values are not equal,additional nonqualifying property referred to as "boot" can be used to equalize the transaction without disqualifying the nonrecognition transaction.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following statements is/are correct?
I.The carryover-holding period only applies if the property exchanged is personal-use property.
II.The holding period of like-kind property received includes the holding period of the property exchanged.

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 17

worth $800,000,has an adjusted basis of $300,000 and is encumbered by a $400,000 mortgage.
Benito owns an office building he purchased five years ago at a cost of $600,000.The property is currently
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

a. Benito must pay @#LAT-DLM& in cash to equalize

Question 18

Ed and Elise got married during the year and they each sold their homes to buy a new house for them to live in.As long as they file a joint return they can each claim a $250,000 exclusion.

Accepted Answer

A) True 
 B)False

Question 19

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?

Accepted Answer

a.David must recognize an unrecaptured S

Question 20

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?
$$\begin{array} { l l l } 
& { \text { Recognized } } & \text { New } \
& \underline { \text { Gain  (Loss)  } }& \underline { \text { Basis }} \
\text { a. } & \$-0- & \$ 120,000 \
\text { b. } & \$ 20,000 & \$ 120,000 \
\text { c. } &\$ 30,000 & \$ 110,000 \
\text { d. } & \$ 10,000 & \$ 130,000  \
\text { e. } & \$ 20,000 & \$ 100,000
\end{array}$$

Accepted Answer

The answer of Daisy's warehouse is destroyed by a tornado.The...

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

Match each statement with the correct term below. -Wherewithal-to-pay

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

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

Which of the following qualify as a like-kind exchange? -A personal residence for a vacation home.

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

When two qualified assets are exchanged and their fair market values are not equal,additional nonqualifying property referred to as "boot" can be used to equalize the transaction without disqualifying the nonrecognition transaction.

Which of the following statements is/are correct? I.The carryover-holding period only applies if the property exchanged is personal-use property. II.The holding period of like-kind property received includes the holding period of the property exchanged.

Ed and Elise got married during the year and they each sold their homes to buy a new house for them to live in.As long as they file a joint return they can each claim a $250,000 exclusion.

Federal Income Taxation - an Overview

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

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

Match each statement with the correct term below. -Wherewithal-to-pay

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

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

Which of the following qualify as a like-kind exchange? -A personal residence for a vacation home.

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

When two qualified assets are exchanged and their fair market values are not equal,additional nonqualifying property referred to as "boot" can be used to equalize the transaction without disqualifying the nonrecognition transaction.

Which of the following statements is/are correct? I.The carryover-holding period only applies if the property exchanged is personal-use property. II.The holding period of like-kind property received includes the holding period of the property exchanged.

Ed and Elise got married during the year and they each sold their homes to buy a new house for them to live in.As long as they file a joint return they can each claim a $250,000 exclusion.

Federal Income Taxation - an Overview

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