Exam 12: Special Property Transactions

Jane and Jason (married taxpayers) sell their personal residence in 2015. In order to exclude the maximum gain allowed for married couples on the sale of the residence, they must:

Exchange of one partnership interest for another partnership interest qualifies as a like-kind exchange.

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.

All of the following taxpayers can use the installment method to report gains from the sale of assets except:

Libby exchanges a building she uses in her rental business for a building owned by Randy which she will use in her rental business. The adjusted basis of Libby's building is $80,000 and the fair market value is $125,000. The adjusted basis of Randy's building is $40,000 and the fair market value is $125,000. What is Libby's recognized gain on the transaction and her adjusted basis in the building she receives?

A warehouse with an adjusted basis of $125,000 was destroyed by a tornado on April 15, 2016. On June 15, 2016, the insurance company paid the owner $195,000. The owner reinvested $170,000 in a warehouse. What is the basis of the new warehouse if non-recognition of gain from an involuntary conversion is elected?

Basil, who is single, purchased a house on May 10, 1982, 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, 2015, 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?

The gross profit percentage is typically the gross profit divided by the contract price.

The time period to replace property destroyed in an involuntary conversion is two years from the event.

Tanner, who is single, purchased a house on April 15, 2001 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, 2015, 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?

Pierre sold a parcel of land for $50,000. He received $10,000 this year and signs a contract to receive four additional payments of $10,000 each plus interest. If Pierre had a basis in the land of $10,000 and incurred $2,500 in selling expenses, what is his gross profit percentage?

The receipt of boot in a like-kind exchange causes the recognition of a realized gain.