Question 1

The deferral of a gain realized on an involuntary conversion is mandatory.

Accepted Answer

A) True 
 B)False

Question 2

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?
$\begin{array}{lr}
\text { Gain (Loss) Recognized } & \text { Basis } \
a.\$-0- & \$ 75,000 \
b.\$(15,000) & \$ 65,000 \
c.\$(35,000) & \$ 85,000 \
d.\$ 20,000 & \$ 30,000 \
e.\$ 15,000 & \$ 35,000
\end{array}$

Accepted Answer

The answer of Matthew exchanges an investment apartment building for...

Question 3

Commonalties of nonrecognition transactions include that
I.deferring a loss is mandatory on like-kind exchanges.
II.deferring a loss is mandatory on involuntary conversions.

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 4

Which of the following qualify as a like-kind exchange?
-Office building for office equipment.

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 5

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 recognized gain on the transaction?

Accepted Answer

A) $ - 0 - 
B) $1,000 
C) $2,000 
D) $3,000 
E) $5,000 
A) $ - 0 - 
B) $1,000 
C) $2,000 
D) $3,000 
E) $5,000

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Match each statement with the correct term below.
-Realized gain

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.

Question 8

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

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

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 realized gain on the transaction?

Accepted Answer

A) $ - 0 - 
B) $1,000 
C) $2,000 
D) $3,000 
E) $5,000 
A) $ - 0 - 
B) $1,000 
C) $2,000 
D) $3,000 
E) $5,000

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

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.

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 12

Charlotte purchases a residence for $105,000 on April 13,2003.On July 1,2011,she marries Howard and they use Charlotte's house as their principal residence.If they sell their home for $390,000,incurring $20,000 of selling expenses and purchase another residence costing $350,000.Which of the following statements is/are correct concerning the sale of their personal residence?
I
If they sell the residence on June 1,2013,they must recognize a gain of $15,000 on the sale.
II)If they sell the residence on August 1,2013,they will recognize no gain on the sale.

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

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

Accepted Answer

A) The date of the actual condemnation. 
B) The date of the threat of condemnation. 
C) Two years before the actual condemnation. 
D) Two years before the threat of condemnation. 
E) Three years after the date of the condemnation. 
A) The date of the actual condemnation. 
B) The date of the threat of condemnation. 
C) Two years before the actual condemnation. 
D) Two years before the threat of condemnation. 
E) Three years after the date of the condemnation.

Question 14

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.

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

Which of the following qualify as replacement property under the involuntary conversion rules?
I.Mayfield Ice Cream Company's production plant is destroyed by a hurricane.The insurance proceeds are used to replace the plant with a refrigerated storage container.
II.Mayfield Ice Cream Company's production plant is destroyed by a fire.They sign a five year lease for a replacement production facility,and the insurance proceeds are then used to buy an office building

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 16

Match each statement with the correct term below.
-Boot

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.

Question 17

A flood destroys Owen's building that cost $100,000 in 2007,which has an adjusted basis of $80,000.Owen's insurance company reimburses him $125,000 for his loss.Owen promptly reconstructs the building for $115,000.What is the minimum amount of gain that Owen must recognize and his basis in the new building?
$$\begin{array} { l l l } 
& { \text { Recognized } } & \text { New } \
& \underline { \text { Gain } }& \underline { \text { Basis }} \
\text { a. } & \$ - 0 - & \$ 80,000 \
\text { b. } & \$ - 0 - & \$ 115,000 \
\text { c. } & \$ 10,000 & \$ 80,000 \
\text { d. } & \$ 10,000 & \$ 115,000 \
\text { e. } & \$ 10,000 & \$ 150,000
\end{array}$$

Accepted Answer

The answer of A flood destroys Owen's building that cost...

Question 18

Which of the following qualify as a like-kind exchange?
-Microsoft common stock for Merrill Lynch common stock.

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 19

Belinda exchanges investment real estate with Russell.Belinda's adjusted basis in her two-year old property is $280,000.The property is encumbered by a mortgage of $100,000 and has a fair market value of $320,000 when exchanged.Russell assumes that debt.Russell paid $80,000 cash for his property in 1999 and it is appraised at $150,000 on the day of the exchange.Russell pays Belinda enough in cash to balance the exchange.What is Belinda's basis in the new land?

Accepted Answer

A) $ 20,000 
B) $150,000 
C) $280,000 
D) $320,000 
A) $ 20,000 
B) $150,000 
C) $280,000 
D) $320,000

Question 20

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

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.

The deferral of a gain realized on an involuntary conversion is mandatory.

Commonalties of nonrecognition transactions include that I.deferring a loss is mandatory on like-kind exchanges. II.deferring a loss is mandatory on involuntary conversions.

Which of the following qualify as a like-kind exchange? -Office building for office equipment.

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

Match each statement with the correct term below. -Realized gain

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

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

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.

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

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.

Match each statement with the correct term below. -Boot

Which of the following qualify as a like-kind exchange? -Microsoft common stock for Merrill Lynch common stock.

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

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

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Exam 12: Nonrecognition Transactions

The deferral of a gain realized on an involuntary conversion is mandatory.

Commonalties of nonrecognition transactions include that I.deferring a loss is mandatory on like-kind exchanges. II.deferring a loss is mandatory on involuntary conversions.

Which of the following qualify as a like-kind exchange? -Office building for office equipment.

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

Match each statement with the correct term below. -Realized gain

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

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

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.

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

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.

Match each statement with the correct term below. -Boot

Which of the following qualify as a like-kind exchange? -Microsoft common stock for Merrill Lynch common stock.

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

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