Exam 12: Non-Recognition Transactions

Cindy exchanges investment real estate with Russell. Cindy purchased her realty two years ago for $280,000, and it is encumbered by a mortgage of $100,000 and has a fair market value of $320,000 when exchanged. Russell paid $80,000 cash for his property in 1999 and it is appraised at $150,000 on the day of the exchange. Russell assumes the debt on his new land and pays Cindy enough in cash to balance the exchange. What is Cindy's recognized gain (loss) on the exchange?

Charlotte purchases a residence for $105,000 on April 13, 2005. On July 1, 2016, 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 1,2018 , they must recognize a gain of $\$ 15,000$ on the sale. II. If they sell the residence on August 1,2018 , they will recognize no gain on the sale.

Which of the following exchanges of property are like-kind exchanges? I.Convenience store owner trades several cases of potato chips for a cash register. II.A completely rented apartment building traded for a parts supply warehouse to use in business. ​

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. How much boot does Rosilyn receive in the transaction?

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

Match each statement with the correct term below. -Like-kind property

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

Which of the following qualifies as a like-kind exchange of property? I.Commercial retail building and its land for an office building and its land. II.Louisiana Oil, Inc. common stock for Louisiana Oil, Inc. corporate bonds. ​

In general, qualified replacement property for an involuntary conversion must be purchased within one year after the close of the tax year in which the involuntary conversion occurred.

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?

Simon exchanged his Mustang for Michael's Econovan so that he could go hunting. The exchange does not qualify as a like-kind exchange since the assets are personal.

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

Taxpayers are allowed to structure transactions through third parties that qualify as exchanges if they meet certain time requirements for identifying properties and closing the transaction.

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 qualify as a like-kind exchange? -Computer for delivery truck.

Compare the deferral of recognition of losses resulting from an involuntary conversion with the deferrals for like-kind exchanges.

A gain on a like-kind exchange is always recognized to the extent of any boot received.

Nancy purchased her houseboat six years ago for $35,000. She has lived in the houseboat since she purchased it. A friend has offered $62,000 for the houseboat. If she sells it, she will be able to exclude the gain.

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?

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?