Question 1

According to Sec. 121, individuals who sell or exchange their personal residence may exclude part or all of the gain if the house was owned and occupied as a principal residence for

Accepted Answer

A)  at least five years immediately before the sale date. 
B)  at least one year of the three-year period before the sale date. 
C)  at least two years of the five-year period before the sale date. 
D)  at least five years of the ten-year period before the sale date.

Question 2

When the cost of replacement property is less than the amount realized on an involuntary conversion, gain will be recognized. The recognized gain will be equal to the amount realized over the cost of the replacement property, but not more than the total realized gain.

Accepted Answer

A) True 
 B)False

Question 3

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 4

Dean exchanges business equipment with a $120,000 adjusted basis for $40,000 cash and business equipment with a $140,000 FMV. What is the amount of gain which Dean recognizes on the exchange?

Accepted Answer

A)  $0 
B)  $20,000 
C)  $40,000 
D)  $60,000

Question 5

Discuss the basis rules of property received in a nontaxable like-kind exchange.

Accepted Answer

The answer of Discuss the basis rules of property received...

Question 6

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 7

Frank, a single person age 52, sold his home this year. He had lived in the house for 10 years. He signed a contract on March 4 to sell his home and closed the sale on May 3.
$$\begin{array} { | l | r | } 
\hline \text { Sales price } & \$ 202,000 \
\hline \text { Selling expenses paid by Frank } & 12,000 \
\hline \text { Replaced a broken window on March 2 } & 200 \
\hline \text { Basis of old home before repairs and improvements } & 150,000 \
\hline
\end{array}$$ Based on these facts, what is the amount of his recognized gain?

Accepted Answer

A)  $0 
B)  $39,800 
C)  $40,000 
D)  $52,000

Question 8

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 9

Which of the following statements is false with regard to the ownership and use tests under Sec. 121?

Accepted Answer

A)  The taxpayer must be occupying the residence at the time of the sale in order for Sec. 121 to apply. 
B)  If a principal residence is sold before satisfying the ownership and use tests, part of the gain may be excluded if the sale is due to a change in employment, health, or unforeseen circumstances. 
C)  For purposes of the two-year ownership rule, a taxpayer's period of ownership includes the period during which the taxpayer's deceased spouse owned the residence. 
D)  When a taxpayer receives a residence from a spouse or an ex-spouse incident to a divorce, the taxpayer's period of owning the property includes the time the residence was owned by the spouse or ex-spouse.

Question 10

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....

Question 11

A sale of property and subsequent purchase of like-kind property may be treated as a like-kind exchange if the two transactions are interdependent.

Accepted Answer

A) True 
 B)False

Question 12

On May 1 of this year, Ingrid sold her personal residence for $250,000. Commissions on the sale were $20,000. Ingrid also incurred $10,000 of costs for painting and repairs, which were all completed and paid for two weeks prior to the sale of her home. Ingrid's basis in her old home was $180,000. Ingrid's realized gain upon the sale of her first home is

Accepted Answer

A)  $ 0. 
B)  $40,000. 
C)  $50,000. 
D)  $70,000.

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

All of the following conditions would encourage a taxpayer to avoid like-kind exchange treatment on the disposition of an otherwise qualifying asset except

Accepted Answer

A)  expected lower tax rates in the future. 
B)  the availability of net operating loss carryovers. 
C)  the disposition of a capital gain asset when the taxpayer has a capital loss carryover. 
D)  a realized loss on the asset disposed of.

Question 15

The $250,000/$500,000 exclusion for gain on the sale of a personal residence is only available to taxpayers who are age 55 or older.

Accepted Answer

A) True 
 B)False

Question 16

If there is a like-kind exchange of property between related parties, how long do they have to wait to dispose of the property received in order to avoid having to recognize any gain on the exchange?

Accepted Answer

A)  6 months 
B)  1 year 
C)  2 years 
D)  no waiting period

Question 17

If a principal residence is sold before satisfying the ownership and use tests, part of the gain may be excluded if the sale is due to a change in employment, health, or unforeseen circumstances.

Accepted Answer

A) True 
 B)False

Question 18

The holding period for boot property received begins on the day after the date of the exchange.

Accepted Answer

A) True 
 B)False

Question 19

Rosa exchanges business equipment with a $60,000 adjusted basis for a like-kind piece of equipment with a $100,000 FMV and $20,000 of marketable securities. What is Rosa's basis for the new equipment?

Accepted Answer

A)  $60,000 
B)  $80,000 
C)  $100,000 
D)  $120,000

Question 20

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...

Exam 27: Property Transactions: Nontaxable Exchanges

According to Sec. 121, individuals who sell or exchange their personal residence may exclude part or all of the gain if the house was owned and occupied as a principal residence for

When the cost of replacement property is less than the amount realized on an involuntary conversion, gain will be recognized. The recognized gain will be equal to the amount realized over the cost of the replacement property, but not more than the total realized gain.

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

Dean exchanges business equipment with a $120,000 adjusted basis for $40,000 cash and business equipment with a $140,000 FMV. What is the amount of gain which Dean recognizes on the exchange?

Discuss the basis rules of property received in a nontaxable like-kind exchange.

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.

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?

Which of the following statements is false with regard to the ownership and use tests under Sec. 121?

A sale of property and subsequent purchase of like-kind property may be treated as a like-kind exchange if the two transactions are interdependent.

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

All of the following conditions would encourage a taxpayer to avoid like-kind exchange treatment on the disposition of an otherwise qualifying asset except

The $250,000/$500,000 exclusion for gain on the sale of a personal residence is only available to taxpayers who are age 55 or older.

If there is a like-kind exchange of property between related parties, how long do they have to wait to dispose of the property received in order to avoid having to recognize any gain on the exchange?

If a principal residence is sold before satisfying the ownership and use tests, part of the gain may be excluded if the sale is due to a change in employment, health, or unforeseen circumstances.

The holding period for boot property received begins on the day after the date of the exchange.

Rosa exchanges business equipment with a $60,000 adjusted basis for a like-kind piece of equipment with a $100,000 FMV and $20,000 of marketable securities. What is Rosa's basis for the new equipment?

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