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

Alex used the § 121 exclusion three months prior to his marriage to June.If June sells her principal residence four months after their marriage,she can use the § 121 exclusion.

Pam exchanges a rental building,which has an adjusted basis of $520,000,for investment land which has a fair market value of $700,000.In addition,Pam receives $100,000 in cash.What is the recognized gain or loss and the basis of the investment land?

Carlton purchases land for $300,000.He incurs legal fees of $5,000 associated with the purchase.He subsequently incurs additional legal fees of $20,000 in having the land rezoned from agricultural to residential.He subdivides the land and installs streets and sewers at a cost of $600,000.What is Carlton's basis for the land and the improvements?

Molly exchanges a small machine (adjusted basis of $85,000;fair market value of $78,000)used in her business and investment land (adjusted basis of $10,000;fair market value of $15,000)for a large machine (fair market value of $93,000)to be used in her business in a like-kind exchange.What is Molly's recognized gain or loss?

To qualify as a like-kind exchange,real property must be exchanged either for other real property or for personal property with a statutory life of at least 39 years.

A factory building owned by Amber,Inc.is destroyed by a hurricane.The adjusted basis of the building was $400,000 and the appraised value was $425,000.Amber receives insurance proceeds of $390,000.A factory building is constructed during the nine-month period after the hurricane at a cost of $450,000.What is the recognized gain or loss and what is the basis of the new factory building?

Milt's building which houses his retail sporting goods store is destroyed by a flood.Sandra's warehouse which she is leasing to Milt to store the inventory of his business also is destroyed in the same flood.Both Milt and Sandra receive insurance proceeds that result in a realized gain.Sandra will have less flexibility than Milt in the type of building in which she can invest the proceeds and qualify for postponement treatment under § 1033 (nonrecognition of gain from an involuntary conversion).

Elvis owns all of the stock of Shadow Corporation.The accumulated earnings and profits of Shadow Corporation at the end of the year are a deficit of $110,000.The current earnings and profits are $0.Elvis' basis for his stock is $295,000.He receives a distribution of $300,000 on the last day of the tax year.How much gain should Elvis report?

If a taxpayer reinvests the net proceeds (amount received - related expenses)received in an involuntary conversion in qualifying replacement property within the statutory time period,the realized gain cannot be recognized.

The maximum amount for the § 121 exclusion (exclusion of gain on sale of principal residence)that can reduce taxable income for an unmarried taxpayer is $250,000 and for a married taxpayer is $500,000.

Rita and Todd exchange real estate in a like-kind exchange.Rita's property is subject to a $40,000 mortgage and has a basis of $75,000 (fair market value of $112,000).She receives real estate with a fair market value of $72,000 and Todd assumes the mortgage.What is her recognized gain and adjusted basis for the real estate received?

Abner gives his daughter,Melissa,stock (basis of $50,000;fair market value of $44,000).No gift tax is paid.If Melissa subsequently sells the stock for $53,000,what is her recognized gain or loss?

Which of the following might motivate a taxpayer to try to avoid like-kind exchange treatment?

The holding period of property acquired by gift may begin on:

If Wal-Mart stock increases in value during the tax year by $4,500,the amount realized is a positive $4,500.

Sarah is an executive at Robin Yogurt.Because she loves the yogurt so much,in the current year she decides to buy a yogurt machine from Robin for $9,300.The machine cost the company $9,000 (the wholesale price),and it has a fair market value of $12,500 (price at which sold at retail).Only executives are permitted to buy yogurt machines at a discount.What is Sarah's adjusted basis for the yogurt machine and how much must she include in her gross income?

The basis of property received by inheritance is a carryover basis.

Which of the following qualify as a like-kind exchange?

Kimmy sells her personal use automobile for $19,000.She purchased the car three years ago for $35,000.What is Kimmy's recognized gain or loss?

Kelly inherits land which had a basis to the decedent of $95,000 and a fair market value of $50,000 on August 4,2010,the date of the decedent's death.The executor distributes the land to Kelly on November 12,2010,at which time the fair market value is $49,000.The fair market value on February 4,2011,is $45,000.In filing the estate tax return,the executor elects the alternate valuation date.Kelly sells the land on June 10,2011,for $48,000.What is her recognized gain or loss?