Exam 12: Nonrecognition Transactions

Lindsey exchanges investment real estate parcels with Donna.Her adjusted basis in the property is $400,000,and it is encumbered by a mortgage liability of $200,000.Donna assumes the mortgage.Donna's property is appraised at $1,000,000 and is subject to a $100,000 liability.Lindsey assumes the liability.If no cash is exchanged,what is the amount of gain recognized by Lindsey?

Nancy acquired office equipment for her business in 2010 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 qualifies as a like-kind exchange of property? I.Inventory for inventory. II.Office equipment for a delivery van.

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?

Lindsey exchanges investment real estate parcels with Donna.Lindsay's adjusted basis in the property is $400,000,and it is encumbered by a mortgage liability of $200,000.Donna assumes the mortgage.Donna's property is appraised at $1,000,000 and is subject to a $100,000 liability.Lindsey assumes the liability.If no cash is exchanged,what is Lindsey's basis in the new real estate?

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

For a transaction to qualify as a third-party exchange, I.The exchange must be completed within 1 year of the first exchange. II.The property exchanged must be identified within 45 days of the first exchange.

Karen owns a commercial office building with a fair market value of $140,000.She purchased the building as an investment for $102,000 in 2003.She has claimed $18,000 in depreciation deductions.Karen trades the building for an apartment complex.The apartment complex has a value of $140,000,and the exchange qualifies for like-kind deferral treatment.What is Karen's basis in the apartment complex?

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?

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

Which of the following qualify as a like-kind exchange? -Office copier for an office fax machine.

Which of the following qualify as replacement property under the involuntary conversion rules? I.Smooth Yogurt Company's warehouse for storing its yogurt curds is condemned by the port authority.The warehouse will be replaced with a new office building in a neighboring community. II.Smooth Yogurt Company's other warehouse,which was fully leased to another company,is destroyed by a tornado.The warehouse will be replaced with a rental office building adjacent to the company's new office building and will be leased to various tenants.

Roscoe receives real estate appraised at $200,000 and cash of $10,000 from Cathy in exchange for Roscoe's investment realty with a basis of $170,000.Roscoe plans to hold the new realty for investment.What is the amount realized for the property given up by Roscoe?

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

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

Match each statement with the correct term below. -Involuntary conversion

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.

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

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?

Robert trades an office building located in Tennessee to John for an apartment complex located in New Jersey.Details of the two properties: Justin John Fair market value \ 9,000,000 \ 4,000,000 Adjusted basis 3,000,000 3,000,000 Liabilities transferred with property 2,000,000 -0- In addition,John pays Robert $3,000,000 cash as part of this transaction.What is the gain (loss)recognized by Robert in this transaction and what is his basis in the New Jersey property? Gain Recognized Adjusted B asis a.\ 6,000,000 \ 4,000,000 b.\ 5,000,000 \ 3,000,000 c.\ 3,000,000 \ 2,000,000 d.\ 5,000,000 \ 4,000,000 e. Some other amounts