Exam 13: Part 1--Property Transactions: Determination of Gain or Loss,basis Considerations,and Nontaxable Exchanges

The taxpayer owns land with an adjusted basis of $20,000 and a fair market value of $50,000.If the property is going to be given to the taxpayer's nephew,it is preferable for the transfer to be by inheritance rather than by gift.

Maud exchanges a rental house at the beach with an adjusted basis of $350,000 and a fair market value of $325,000 for a rental house at the mountains with a fair market value of $305,000 and cash of $20,000.What is the recognized gain or loss?

The fair market value of property received in a sale or other disposition is the price at which property will change hands between a willing seller and a willing buyer when neither is compelled to sell or buy.

Todd gives Sam stock (adjusted basis of $72,000;fair market value of $69,000).Sam later sells the stock for $71,000.Sam's recognized loss is $1,000 ($71,000 amount realized - $72,000 adjusted basis).

A realized gain whose recognition is postponed results in the temporary recovery of less than the taxpayer's cost or other basis.

Which of the following statements is false?

Amos sells his principal residence,which has an adjusted basis of $100,000 for $150,000.He incurs selling expenses and legal fees of $6,000.He had purchased another residence one month prior to the sale for $140,000.What is the recognized gain or loss and the basis of the replacement residence if the taxpayer elects to forgo the § 121 exclusion (exclusion of gain on sale of principal residence)?

Melvin receives stock as a gift from his uncle.No gift tax is paid.The adjusted basis of the stock is $19,000 and the fair market value is $25,000.Melvin trades the stock for bonds with a fair market value of $22,000 and $3,000 cash.What is his recognized gain and the basis for the bonds?

In a like-kind exchange involving boot,the ceiling on recognized gain is the lower of realized gain or boot received.

Abner,age 80 and in poor health,owns investment land with an adjusted basis of $50,000.He is considering transferring it to Stella,his niece.Regarding Stella's income tax position,should the transfer to her be by gift or by inheritance? (Assume neither gift tax nor estate tax would be due,and that the property is not expected to change in value. )

If the recognized gain on an involuntary conversion equals the realized gain because of a reinvestment deficiency,the basis of the replacement property will be less than its cost.

The holding period for property acquired by gift is automatically long term.

Gains and losses on nontaxable exchanges are deferred because the tax law recognizes that nontaxable exchanges result in a change in the form but not the substance of the taxpayer's relative economic position.

Which of the following statements correctly reflects the rules regarding inherited property?

Over the past 25 years,Alfred has purchased 380 shares of Green,Inc. ,common stock.His first purchase was in 1987 when he acquired 30 shares for $20 a share.In 1989,Alfred bought 150 shares at $10 a share.In 2008,Alfred acquired 200 shares at $50 a share.Alfred intends to sell 125 shares at $60 per share in the current year.If Alfred's objective is to minimize gain,what is his recognized gain?

Nontaxable stock dividends result in:

Latisha owns a warehouse with an adjusted basis of $112,000.She exchanges it for a strip mall building worth $150,000.Which of the following statements is correct?

Molanda sells a parcel of land for $18,000 in cash and the buyer assumes Molanda's mortgage of $12,000 on the land.Molanda's amount realized is $30,000.

In determining the basis of like-kind property received,postponed losses are:

The holding period of replacement property where the election to postpone gain is made includes the holding period of the involuntarily converted property.