Question 1

Eric exchanges a printing press with an adjusted basis of $64,000 for a smaller model with a $100,000 fair market value.In addition,he receives $20,000 of marketable securities.
a.What is the amount of gain realized by Eric?
b.What is the amount of gain recognized by Eric?
c.What is Eric's basis in the new printing press?
d.What is Eric's basis in the marketable securities?

Accepted Answer

The answer of Eric exchanges a printing press with an...

Question 2

May a taxpayer elect under Sec.1033 to defer recognition of loss resulting from an involuntary conversion?

Accepted Answer

The answer of May a taxpayer elect under Sec.1033 to...

Question 3

If the taxpayer elects to defer the gain on an involuntary conversion,the holding period of the replacement property begins on the date of purchase.

Accepted Answer

A) True 
 B)False

Question 4

For purposes of nontaxable exchanges,cash and non-like-kind property constitute boot.

Accepted Answer

A) True 
 B)False

Question 5

An exchange of inventory for inventory of a like kind qualifies as a like-kind exchange.

Accepted Answer

A) True 
 B)False

Question 6

Where non-like-kind property other than cash is received as boot,the amount of the boot is the property's fair market value.

Accepted Answer

A) True 
 B)False

Question 7

Mick owns a racehorse with a $500,000 basis used for breeding purposes.The racehorse is killed in an accident and Mick receives $750,000 from the insurance company.Mick purchases another racehorse for $400,000.
a.What is the amount of Mick's realized gain?
b.What is the minimum amount of Mick's recognized gain,assuming the appropriate election is made?

Accepted Answer

The answer of Mick owns a racehorse with a $500,000...

Question 8

The building used in Terry's business was condemned by the city of St.Louis.Terry received a condemnation award of $125,000.He paid $1,200 in lawyer's fees and $800 for an appraisal of the property.Terry's adjusted basis in the building was $60,000.Terry reinvests in similar property costing $110,000,and Terry makes the proper election regarding the property.What is the amount of Terry's recognized gain on the condemnation?

Accepted Answer

A) $15,000 
B) $13,000 
C) $50,000 
D) $63,000

Question 9

Alex owns an office building which the state condemns on January 15,2016.Alex receives the condemnation award on April 1,2016.In order to qualify for nonrecognition of gain on this involuntary conversion,what is the last date for Alex to acquire qualified replacement property?

Accepted Answer

A) April 1,2018 
B) April 1,2019 
C) December 31,2018 
D) December 31,2019

Question 10

Daniella exchanges business equipment with a $100,000 adjusted basis for $10,000 cash and business equipment with a $96,000 FMV.What is the amount of gain recognized on the exchange?

Accepted Answer

A) $0 
B) $4,000 
C) $6,000 
D) $10,000

Question 11

Replacing a building with land qualifies as replacement property under the involuntary conversion rules relevant to a casualty.

Accepted Answer

A) True 
 B)False

Question 12

The taxpayer must be occupying the residence at the time of the sale in order for Sec.121 to apply.

Accepted Answer

A) True 
 B)False

Question 13

Rolf exchanges an office building worth $150,000 for investment land worth $175,000.He also provided stock worth $25,000.Rolf's adjusted basis in the building and stock is $130,000 and $11,000,respectively.How much gain will Rolf recognize on the exchange?

Accepted Answer

A) $0 
B) $14,000 
C) $20,000 
D) $34,000

Question 14

Nicki is single and 46 years old.She sells her principal residence (adjusted basis $200,000)that she purchased ten years ago for $435,000.
a.What is the amount of Nicki's recognized gain on the sale?
b.Assume instead that Nicki sells the residence for $485,000.What is the amount of Nicki's recognized gain on the sale?
c.Assume instead that Nicki has been married to Mike for the entire time they have owned and lived in the home.If they sell the home for $485,000,what is the amount of their recognized gain on the sale?

Accepted Answer

The answer of Nicki is single and 46 years old.She...

Question 15

If a taxpayer owns more than one home,she can designate the home that will be considered her principal residence for purposes of the Sec.121 exclusion.

Accepted Answer

A) True 
 B)False

Question 16

A taxpayer exchanges an office building held as an investment asset for an office building to be used in her business.The exchange will qualify as like-kind.

Accepted Answer

A) True 
 B)False

Question 17

In an involuntary conversion,the basis of replacement property is its cost reduced by the gain deferred.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following statements in not correct regarding the compliance requirements of an involuntary conversion?

Accepted Answer

A) The taxpayer elects the deferral by not reporting the gain as income for the first year in which the gain is realized although all relevant information regarding the event will be reported. 
B) A taxpayer who recognized the full gain and paid the taxes can later file a refund claim to elect the deferral if qualified property is acquired before the expiration of the replacement period. 
C) A taxpayer elects to defer the full gain in the year the gain is realized (year one),and no gain is reported on that year's tax return.Qualified replacement property is acquired in the following year (year two),but the full insurance proceeds are not spent so some gain must be recognized.The partial gain recognition will be reported on the tax return for year two. 
D) A taxpayer properly elected to defer the full realized gain in year one and provides appropriate information on the replacement property.The taxpayer cannot later revoke the election and designate a different property as the replacement property.

Question 19

When an involuntary conversion is due to the condemnation of real property held for productive use in a trade or business or for investment,the replacement period will end three years after the close of the first tax year in which any part of the gain is realized.

Accepted Answer

A) True 
 B)False

Question 20

If each party in a like-kind exchange assumes a liability of the other party,only the net liability given or received is boot.

Accepted Answer

A) True 
 B)False

Exam 12: Property Transactions: Nontaxable Exchanges

May a taxpayer elect under Sec.1033 to defer recognition of loss resulting from an involuntary conversion?

If the taxpayer elects to defer the gain on an involuntary conversion,the holding period of the replacement property begins on the date of purchase.

For purposes of nontaxable exchanges,cash and non-like-kind property constitute boot.

An exchange of inventory for inventory of a like kind qualifies as a like-kind exchange.

Where non-like-kind property other than cash is received as boot,the amount of the boot is the property's fair market value.

Alex owns an office building which the state condemns on January 15,2016.Alex receives the condemnation award on April 1,2016.In order to qualify for nonrecognition of gain on this involuntary conversion,what is the last date for Alex to acquire qualified replacement property?

Daniella exchanges business equipment with a $100,000 adjusted basis for $10,000 cash and business equipment with a $96,000 FMV.What is the amount of gain recognized on the exchange?

Replacing a building with land qualifies as replacement property under the involuntary conversion rules relevant to a casualty.

The taxpayer must be occupying the residence at the time of the sale in order for Sec.121 to apply.

Rolf exchanges an office building worth $150,000 for investment land worth $175,000.He also provided stock worth $25,000.Rolf's adjusted basis in the building and stock is $130,000 and $11,000,respectively.How much gain will Rolf recognize on the exchange?

If a taxpayer owns more than one home,she can designate the home that will be considered her principal residence for purposes of the Sec.121 exclusion.

A taxpayer exchanges an office building held as an investment asset for an office building to be used in her business.The exchange will qualify as like-kind.

In an involuntary conversion,the basis of replacement property is its cost reduced by the gain deferred.

Which of the following statements in not correct regarding the compliance requirements of an involuntary conversion?

When an involuntary conversion is due to the condemnation of real property held for productive use in a trade or business or for investment,the replacement period will end three years after the close of the first tax year in which any part of the gain is realized.

If each party in a like-kind exchange assumes a liability of the other party,only the net liability given or received is boot.