Question 1

At a particular point in time,a taxpayer can have one or two principal residences for § 121 exclusion purposes.

Accepted Answer

A) True 
 B)False

Question 2

A building located in Virginia (used in business)exchanged for a building located in France (used in business)cannot qualify for like-kind exchange treatment.

Accepted Answer

A) True 
 B)False

Question 3

In October 2012,Ben and Jerry exchange investment realty in a § 1031 like-kind exchange.Ben bought his real estate in 2002 while Jerry purchased his in 2005.In addition to the realty,Ben receives Pearl,Inc.stock worth $10,000 from Jerry.Ben's realized gain is $30,000.On what date does the holding period for Ben's realty received from Jerry begin? When does the holding period for the stock he receives begin?

Accepted Answer

A)  2002, 2012. 
B)  2002, 2002. 
C)  2005, 2005. 
D)  2005, 2012. 
E)  None of the above.

Question 4

To qualify for the § 121 exclusion,the property must have been owned by the taxpayer for the 5 years preceding the date of sale and used by the taxpayer as the principal residence for the last 2 of those years.

Accepted Answer

A) True 
 B)False

Question 5

An exchange of business or investment property for like-kind property with a § 267 related party cannot qualify as a § 1031 like-kind exchange.

Accepted Answer

A) True 
 B)False

Question 6

Define qualified small business stock under § 1045.

Accepted Answer

The answer of Define qualified small business stock under §...

Question 7

Ross lives in a house he received as a gift from his father.His father had lived in the house for 12 years.The adjusted basis of the house to his father was $160,000 and the fair market value at the time of the gift was $140,000.Ross sells this residence after living in it for 18 months for $150,000 and purchases a new home for $125,000.He incurs selling expenses of $7,000.What is Ross' recognized gain or loss and basis for the new residence?

Accepted Answer

A)  ($17,000); $125,000. 
B)  ($17,000); $142,000. 
C)  $3,000; $125,000. 
D)  $3,000; $128,000. 
E)  None of the above.

Question 8

Sam's office building with an adjusted basis of $750,000 and a fair market value of $900,000 is condemned on November 30,2012.Sam is a calendar year taxpayer.He receives a condemnation award of $875,000 on March 1,2013.He builds a new office building at a cost of $845,000 which is completed and paid for on December 31,2015.What is Sam's recognized gain on receipt of the condemnation award and basis for the new office building assuming his objective is to minimize gain recognition?

Accepted Answer

A)  $0; $720,000. 
B)  $30,000; $750,000. 
C)  $30,000; $845,000. 
D)  $150,000; $750,000. 
E)  None of the above.

Question 9

Janet,age 68,sells her principal residence for $500,000.She purchased it twenty-two years ago for $150,000.Selling expenses are $30,000 and repair expenses to get the house in a marketable condition to sell are $15,000.Janet's objective is to minimize the taxes she must pay associated with the sale.Calculate her recognized gain.

Accepted Answer

The answer of Janet,age 68,sells her principal residence for $500,000.She...

Question 10

Betty owns a horse farm with 500 acres of land (adjusted basis of $600,000).Fifty acres of the land are condemned by the state for $400,000 in order to build a municipal stadium.Since the fair market value of Betty's farm is significantly decreased by the proximity to the future stadium,the state awards Betty $300,000 in severance damages.Betty does not use the $300,000 to restore the usefulness of the farm and all of the $700,000 ($400,000 + $300,000)proceeds are invested in the stock market.What is her recognized gain or loss associated with the receipt of the severance damages?

Accepted Answer

A)  $0. 
B)  $100,000. 
C)  $300,000. 
D)  $340,000. 
E)  None of the above.

Question 11

Moss exchanges a warehouse for a building he will use as an office building.The adjusted basis of the warehouse is $600,000 and the fair market value of the office building is $350,000.In addition,Moss receives cash of $150,000.What is the recognized gain or loss and the basis of the office building?

Accepted Answer

A)  $0 and $350,000. 
B)  $0 and $450,000. 
C)  ($150,000) and $300,000. 
D)  ($200,000) and $350,000. 
E)  None of the above.

Question 12

The taxpayer can elect to have the exclusion of gain under § 121 (sale of principal residence)not apply.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following statements is correct?

Accepted Answer

A)  In a nontaxable exchange in which gain is realized, the transaction results in a permanent recovery of more than the taxpayer's cost or other basis for tax purposes. 
B)  In a nontaxable exchange in which loss is realized, the transaction results in a permanent recovery of less than the taxpayer's cost or other basis for tax purposes. 
C)  In a tax-free transaction in which gain is realized, the transaction results in the permanent recovery of more than the taxpayer's cost or other basis for tax purposes. 
D)  All of the above. 
E)  None of the above.

Question 14

Deidra has owned and occupied her principal residence for 10 years.Two and one-half years ago she married Doug who moved into her house.Doug has never owned a home.When Deidra is transferred to another city,she sells the house and has a realized gain of $425,000.Deidra can exclude the realized gain from her gross income under § 121 if she and Doug file a joint return.

Accepted Answer

A) True 
 B)False

Question 15

Terry exchanges real estate (acquired on August 25,2006)held for investment for other real estate to be held for investment on September 1,2012.None of the realized gain of $10,000 is recognized,and Terry's adjusted basis for the new real estate is a carryover basis of $80,000.Consequently,Terry's holding period for the new real estate begins on August 25,2006.

Accepted Answer

A) True 
 B)False

Question 16

Leta has a fiscal tax year which ends on June 30th.Her factory building is destroyed by a fire on October 12,2012.Two months later,she receives insurance proceeds large enough to produce a realized gain.In order to elect § 1033 postponement,Leta must acquire qualified replacement property by December 31,2014.

Accepted Answer

A) True 
 B)False

Question 17

If the taxpayer qualifies under § 1033 (nonrecognition of gain from an involuntary conversion),makes the appropriate election,and the amount reinvested in replacement property is less than the amount realized,realized gain is:

Accepted Answer

A)  Recognized to the extent of the deficiency (amount realized not reinvested). 
B)  Recognized to the extent of realized gain. 
C)  Recognized to the extent of the amount reinvested in excess of the adjusted basis. 
D)  Permanently not subject to taxation. 
E)  None of the above.

Question 18

Which of the following statements is correct with respect to § 1044 (rollover of publicly traded securities gain into specialized small business investment companies)?

Accepted Answer

A)  Section 1044 provides for permanent exclusion of gain. 
B)  To qualify under § 1044, the proceeds must be reinvested within one year of the sale. 
C)  The statutory ceilings on § 1044 treatment are the same for individual and corporate taxpayers. 
D)  Only b. and c. are correct. 
E)  None of the above.

Question 19

Sonny exchanges a productive use machine (adjusted basis of $20,000)for a new machine worth $18,000.In addition,he receives cash of $6,000.What is the recognized gain or loss and the basis of the new machine?

Accepted Answer

A)  $0 and $18,000. 
B)  $0 and $22,000. 
C)  $4,000 and $18,000. 
D)  $4,000 and $24,000. 
E)  None of the above.

Question 20

An exchange of two items of personal property (personalty)that belong to different general business asset classes qualifies for nonrecognition under § 1031 as long as both properties are used in the taxpayer's trade or business.

Accepted Answer

A) True 
 B)False

Exam 15: Property Transactions: Nontaxable Exchanges

At a particular point in time,a taxpayer can have one or two principal residences for § 121 exclusion purposes.

A building located in Virginia (used in business)exchanged for a building located in France (used in business)cannot qualify for like-kind exchange treatment.

To qualify for the § 121 exclusion,the property must have been owned by the taxpayer for the 5 years preceding the date of sale and used by the taxpayer as the principal residence for the last 2 of those years.

An exchange of business or investment property for like-kind property with a § 267 related party cannot qualify as a § 1031 like-kind exchange.

Define qualified small business stock under § 1045.

The taxpayer can elect to have the exclusion of gain under § 121 (sale of principal residence)not apply.

Which of the following statements is correct?

If the taxpayer qualifies under § 1033 (nonrecognition of gain from an involuntary conversion) ,makes the appropriate election,and the amount reinvested in replacement property is less than the amount realized,realized gain is:

Which of the following statements is correct with respect to § 1044 (rollover of publicly traded securities gain into specialized small business investment companies) ?

Sonny exchanges a productive use machine (adjusted basis of $20,000) for a new machine worth $18,000.In addition,he receives cash of $6,000.What is the recognized gain or loss and the basis of the new machine?

An exchange of two items of personal property (personalty)that belong to different general business asset classes qualifies for nonrecognition under § 1031 as long as both properties are used in the taxpayer's trade or business.