Exam 12: Special Property Transactions

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:

If a taxpayer excludes the gain on the sale of his personal residence and, within two years, sells a second residence, he or she can exclude (up to $250,000 for a single taxpayer):

When a loss is disallowed under the related party loss rules, the loss:

An apartment building with an adjusted basis of $500,000 was destroyed by a tornado on April 30, 2015. On May 10, 2015, the insurance company paid the owner $695,000. The owner reinvested $570,000 in a new apartment complex. What is the basis of the new complex if non-recognition of gain from an involuntary conversion is elected?

Richard's business is condemned by the state on July 10, 2015, as part of a plan to add a highway loop around the city. His adjusted basis in his business is $500,000. He receives condemnation proceeds of $610,000 on August 30, 2015. He purchases another business for $575,000 on September 15, 2015. a. What is Richard's realized and recognized gain or loss? b. What is Richard's basis in the new business?

Louis, who is single, sold his house in St. Louis at a gain of $240,000 on June 8, 2015. He properly excluded the gain. He took another job in Memphis. He purchased a new home in Memphis for $225,000 on August 5, 2015. Louis was transferred by his employer to New Orleans. Louis sold his Memphis house at a $36,000 gain on October 15, 2015. What is Louis's recognized gain on the Memphis house?

A dealer of equipment can recognize gains using the installment method.

No deduction is allowed with respect to any loss from the sale or exchange of property, directly or indirectly, between related parties.

The replacement period for an involuntary conversion always ends two years after the close of the first taxable year in which any part of the gain is realized.

Ko exchanges computer equipment (five-year property) with an adjusted basis of $9,000 for a business auto (five-year property) worth $6,000. Ko also receives cash of $5,000. What are the recognized gain or loss and the basis of the new auto?

On February 12, 2015, Nelson sells stock (basis $175,000) to his son Wayne for $150,000, the stock's fair market value on the date of the sale. On October 21, 2015, Wayne sells the stock to an unrelated party. In each of the following independent cases, determine the tax consequences of the transactions to Nelson and Wayne. a. Wayne sells the stock for $140,000. b. Wayne sells the stock for $180,000. c. Wayne sells the stock for $165,000.

Jasmine sold land for $250,000 in 2015. The land had a basis of $118,000 and she incurred selling expenses of $10,000. Jasmine received $50,000 down in 2015 and will receive five additional annual payments of $40,000 each. How much income will Jasmine recognize in 2016 when she receives the first additional payment of $40,000?

The like-kind exchange provisions are elective provisions.

Edith owns farm land in western Montana. Her adjusted basis is $300,000 and the land is subject to a mortgage of $150,000. She exchanges her land for investment land in Wyoming owned by Dale. The investment land is worth $450,000. Dale assumes Edith's mortgage on the land. What is the amount of Edith's recognized gain or loss on the exchange and what is her adjusted basis in the land she received?

Gain realized on a like-kind exchange is excluded from income in all of the following circumstances except:

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?

The ownership test for the sale of a personal residence states:

The "similar or related in service or use" requirement for property involuntarily converted is less restrictive than the like-kind exchange requirements.

An involuntary conversion results in money received. If the replacement property is purchased within the two-year period, the basis of the new property is its cost less the deferred gain.

Samantha exchanges a truck used in her business with Phyllis for another truck. The basis of Samantha's old truck is $25,000, FMV is $33,000, and she gives Phyllis cash of $7,000. Phyllis's basis in her truck is $35,000 and its FMV is $40,000. What is Samantha's adjusted basis in the new truck she receives?