Exam 12: Special Property Transactions

The City of Greenville condemned 300 acres of Kayla's farmland.Kayla's land was worth $250,000 and her basis was $62,500.In payment to Kayla,the city gave Kayla 500 acres of similar land.An appraisal indicated that the land Kayla received was worth $265,000.What is Kayla's recognized gain or loss on the involuntary conversion and what is her basis in the land received?

Which of the following relationships are considered related parties?

Knox operated a business which was damaged by a hurricane.His losses were as follows: a.What is Knox's net casualty loss if any)assuming his AGI is $85,000 prior to the deduction? Assume he properly replaced all assets. b.What is his basis in replacement Asset 1 purchased for $8,000 assuming Knox elected the non-recognition of gain from an involuntary conversion?

The exchange of a 5-year class asset for a 7-year class asset would not qualify for "like-kind" treatment.

In what instances,concerning involuntary conversions,must a taxpayer file an amended tax return Form 1040X)?

Tanner,who is single,purchased a house on April 15,2002 for $215,000.During the time Tanner owned the house,he installed a swimming pool at a cost of $21,000 and replaced the deck at a cost of $18,000.On August 5,2016,Tanner sold the house for $570,000.Tanner paid a sales commission of $30,000 and legal fees of $800 connected with the sale of the house.What is Tanner's recognized gain on the sale of the house?

Basil,who is single,purchased a house on May 10,1983,for $175,000.During the years Basil owned the house,he installed a pool at a cost of $20,000 and built a new garage at a cost of $20,000.On October 12,2016,Basil sold the house for $518,000.Basil paid a sales commission of $24,600 and legal fees of $400 connected with the sale of the house.What is Basil's recognized gain on the sale of the house?

A wash sale occurs when a taxpayer sells stock or securities at a loss and,within a period of 60 days before or 60 days after the sale,the taxpayer acquires substantially identical stock or securities.

To postpone any gain on an involuntary conversion,the taxpayer must purchase qualifying replacement property that is "similar or related in service or use" to the property involuntarily converted.

With an involuntary conversion,what is the time limit to purchase replacement property?

The like-kind exchange provisions are elective provisions.

Depreciation recapture on an asset sold using the installment method is recognized ratably as payments are received.

Jane and Jason married taxpayers)sell their personal residence in 2016.In order to exclude the maximum gain allowed for married couples on the sale of the residence,they must:

A barn with an adjusted basis of $125,000 was destroyed by a tornado on March 5,2016.On May 15,2016,the insurance company paid the owner $150,000.The owner reinvested $170,000 in another barn.What is the basis of the new barn if non-recognition of gain from an involuntary conversion is elected?

To qualify for the IRC Section 121 exclusion of gain on the sale of a residence,the taxpayer must have lived in the home for a continuous two-year period.

If married taxpayers live in their personal residence for more than two years,the couple can exclude a maximum of $250,000 on the gain from the sale of the residence.

On an involuntary conversion in which the taxpayer does not buy replacement property within the replacement period,the gain on the involuntary conversion and any tax due must be reported:

The exclusion of gain on the sale of a residence applies to only one sale every two years.The taxpayer is always ineligible for the exclusion if,during the two-year period ending on the date of sale of the present home,the taxpayer sold another home at a gain and excluded all or part of that gain no matter the reason for the sale.

Related parties include the taxpayer's spouse,ancestors,lineal descendants,but not brothers and sisters.

The adjusted basis of property received in a like-kind exchange can be calculated by taking the FMV of the property received less the gain postponed plus loss postponed).