Exam 12: Non-Recognition Transactions

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? -An airplane for a duplex apartment.

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 ​

Rationale for nonrecognition includes which of the following? I.A refinement of the realization concept, which postpones recognition of appreciation in value until the taxpayer disposes of a property, or its replacement. II.Under the Substance-over-form doctrine, new property acquired in a transaction is viewed as a continuation of the original investment. III.The taxpayer lacks wherewithal to pay the tax on a realized gain because the amount realized on the transaction is reinvested in the replacement asset. ​

Which of the following is/are correct regarding the deferral of gain attributable to the involuntary conversion of personal property (personality)? I.Gain deferral is mandatory. II.Replacement property must be acquired within one year of the close of the tax year in which gain is realized from an involuntary property damage conversion. ​

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. ​

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

Robert trades an office building located in Tennessee to John for an apartment complex located in New Jersey. Details of the two properties: Robert John Tennessee N. Jersey 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 Basis 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

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?

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?

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

Gain deferral is fundamental to the nonrecognition transactions. In which of the following is gain deferral mandatory? I.Involuntary conversion of business real estate. II.Like-kind exchange of business real estate. ​

The general mechanism used to defer gains and losses from a transaction includes certain adjustments to the fair market value of the replacement property. These adjustments include I.adding boot received. II.subtracting deferred gains. ​

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

Under the like-kind exchange rules, when like-kind property is traded for like-kind property, a loss on a trade-in 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. ​

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

The basis of replacement property in a nonrecognition transaction is the adjusted basis of the property received less any deferred gain.

Classification of a nonrecognition transaction as a continuation of an investment requires a qualified replacement asset.

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?