Exam 12: Special Property Transactions

The contract price in an installment sale is:

A wash sale occurs when:

The property to be received in a like-kind exchange must be identified within:

If a taxpayer trades a personal-use asset for another asset, the exchange does not qualify as a like-kind exchange.

When a loss is disallowed under the wash sale rules,

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.

The purpose of the wash sale rules is to disallow a tax loss on the sale of securities where the ownership of a company is not reduced.

When a taxpayer is released from a liability in a like-kind exchange, the amount of the release:

On July 1, 2015, DJ sold equipment used in her business and reported the gain using the installment method. Her adjusted basis in the equipment was $150,000. The equipment was subject to $30,000 of depreciation recapture. DJ sold the property for $250,000, with $100,000 due on the date of the sale and $150,000 (plus interest at the Federal rate) due on August 1, 2016. What is the amount of gain recognized in 2015?

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).

Matt and Opal were married in April of 2015. Matt has lived in his personal residence for fifteen years and Opal moved into the house after the marriage. Matt died in October 2015. Opal sold the house at a $300,000 gain in December, 2015. How much of the gain can Opal exclude?

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

On an involuntary conversion, gain is recognized to the extent of the lower of gain realized or the proceeds not used for replacement.

Taxpayers are required to use the installment method for deferred payments unless the taxpayer elects not to use the installment method.

Which of the following relationships are considered related parties?

Julia exchanges a machine used in her business with Elvira for another machine. The basis of Julia's old machine is $100,000, FMV is $132,000, and she gives Elvira cash of $28,000. Elvira's basis in her machine is $140,000 and the FMV is $160,000. What, if any, gain is recognized on the transaction and what is the adjusted basis of the property received by Julia and by Elvira?

On December 28, 2015, Misty sold 300 shares of Low Grade, Inc. (a publicly traded company) at a loss of $8,500. On January 5, 2016, thinking that the stock price would rebound, Misty purchased 200 shares of Low Grade, Inc. for $7,000. What is the amount of the recognized loss on the December 28, 2015 sale and what is Misty's basis in the 200 shares she purchased on January 5, 2016?

The IRC Section 121 exclusion of gain on the sale of a residence applies to the taxpayer's principal residence and a vacation home.

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

The installment method cannot be used to report gain from the sale of stock or securities that are traded on an established securities market.