Deck 9: Tax-Deferred Exchanges

Question 1

The loss on the total destruction of business property is always its adjusted basis regardless of fair market value.

Answer 1

True

Question 2

A condemnation is one type of involuntary conversion.

Answer 2

True

Question 3

To defer gain recognition on an involuntary conversion, qualifying property must be obtained
within a specified time period.

Answer 3

True

Question 4

A theft loss of $10,000 cash by an individual results in a $10,000 casualty loss deduction.

Question 5

Internal Revenue Code Section 351, relating to transfers to a controlled corporation, can apply to transfers to both a new and an existing corporation.

Question 6

If a taxpayer's personal residence is involuntarily converted, the taxpayer can only defer gain by acquiring a new residence in the required time period using IRC §1033.

Question 7

For a nonsimultaneous exchange to qualify for like-kind provisions, the taxpayer must identify the property to be acquired within 90 days and actually close the transactions within 180 days.

Question 8

Boot received in a like-kind exchange never causes loss to be recognized.

Question 9

Liabilities assumed by either a partnership or corporation have identical effects on the owners' bases in their ownership interests.

Question 10

The holding period for boot in a like-kind exchange begins on the date of the exchange.

Question 11

Sean inherited a farm his grandfather had purchased 50 years ago for $40,000.It was valued at $1,000,000 when his grandfather died but has a current value of $1,100,000.Sean did not like farming so he traded the farm land and buildings for an apartment building valued at $950,000 owned by Jean that has a basis of $700,000.In addition, Sean received $150,000 in cash from Jean to finalize the exchange.

A)What are the amounts realized by Sean and Jean on the exchange?
B)What are the gains or losses realized by Sean and Jean on the exchange?
C)What are the gains or losses recognized by Sean and Jean on the exchange?
D)What are the bases of the properties received by Sean and Jean?

Question 12

Both gain and loss are deferred in a like-kind exchange.

Question 13

The holding period for property received in a qualifying like-kind exchange begins on the date the new property is received.

Question 14

A taxpayer must transfer a minimum required amount of property, along with any services performed, to include the stock received in meeting the control requirement for a corporate formation.

Question 15

Both gain and loss are deferred in a wash sale.

Question 16

Willow Corporation exchanged land valued at $250,000 (adjusted basis = $175,000) for a building owned by Tree Corporation valued at $350,000 (adjusted basis = $200,000) and $50,000 cash.In addition, Willow assumed the $150,000 mortgage on Tree's building.What are Willow and Tree's realized gains or losses on the properties exchanged, respectively?

A)$75,000, 0
B)$75,000, $150,000
C)$225,000, $150,000
D)$225,000, $200,000

Question 17

The taxpayer-use test for deferral of gain on an involuntary conversion requires the taxpayer to acquire property that has the same function or use as the involuntarily converted property that he or she used prior to the conversion.

Question 18

A business airplane exchanged for a fleet of trucks, all used for the delivery of manufactured goods, is a qualifying like-kind exchange.

Question 19

Expected insurance settlements have no effect on the timing of the deduction for a casualty loss.

Question 20

Willow Corporation exchanged land valued at $250,000 (adjusted basis = $175,000) for a building owned by Tree Corporation valued at $350,000 (adjusted basis = $200,000) and $50,000 cash.In addition, Willow assumed the $150,000 mortgage on Tree's building.What are Willow's and Tree's recognized gain or loss, respectively?

A)0, 0
B)$50,000, $100,000
C)$50,000, $150,000
D)$75,000, $150,000

Question 21

Sid's home was destroyed by fire.He had purchased the home 18 months ago for $950,000.He received $1,300,000 from his insurance company to replace the home.If he fails to rebuild the home or acquire a replacement home in the required time, how much gain must he recognize on this conversion?

A)$350,000
B)$162,500
C)$100,000
D)$0

Question 22

The taxpayer-use test for qualifying replacement property

A)applies only to personalty
B)requires replacement property used by the taxpayer to be used in the same business as the converted property
C)only requires leased realty to be replaced with other leased realty
D)Is more restrictive than the functional-use test

Question 23

Wally's investment real estate was condemned on November 14, 2019.On February 14, 2020, he received $250,000 for the property that had a basis of $210,000.What is the last date that Wally can acquire replacement property to avoid gain recognition?

A)November 14, 2022
B)February 14, 2023
C)December 31, 2022
D)December 31, 2023

Question 24

Zandu Corporation exchanged a building (fair market value = $1,000,000, adjusted basis = $700,000) and two semi-tractor-trailers (fair market value = $300,000; adjusted basis = $225,000), all five years old, for land to build a new facility valued at $1,300,000.What is Zandu's realized and recognized gain and its basis in the land? Realized gain Recognized gain Basis of land

A)0 0 $ 925,000
B)$75,000 $75,000 $1,000,000
C)$300,000 $300,000 $1,300,000
D)$375,000 $75,000 $1,000,000

Question 25

What is the amount of the casualty loss on a business truck that had a fair market value of $14,000 before an accident and $4,000 after an accident, if its adjusted basis is zero?

A)$14,000
B)$10,000
C)$4,000
D)0

Question 26

James corporation exchanges a building (fair market value = $800,000, adjusted basis = $600,000) that has a $100,000 mortgage for another building owned by Pete Corporation (fair market value = $1,100,000, adjusted basis = $600,000) that is encumbered by a $400,000 mortgage.Each party assumes the mortgage on the building received.What are James's and Pete's realized gains on this exchange, respectively?

A)$200,000, $500,000
B)$200,000, $600,000
C)$500,000, $600,000
D)$500,000, $500,000

Question 27

Elizabeth exchanges an office building valued at $400,000 with a $75,000 mortgage and adjusted basis of $180,000 for land valued at $275,000.What is Elizabeth's basis in the land received in the exchange?

A)$400,000
B)$275,000
C)$180,000
D)$75,000

Question 28

Juan owned a small rental property, which was condemned by the county to expand a local park.His adjusted basis in the property was $40,000 and he received a payment of $75,000 from the county.A year later he purchased a similar piece of real estate for $70,000.What is Juan's basis in the replacement property?

A)$40,000
B)$45,000
C)$50,000
D)$70,000

Question 29

Which of the following would not be considered an involuntary conversion?

A)The theft of jewelry
B)Sale of property in a flood zone
C)Condemnation of a building for a highway
D)Destruction of a home by a tornado

Question 30

Elizabeth exchanges an office building valued at $400,000 with a $75,000 mortgage and adjusted basis of $180,000 for land valued at $275,000.What is Elizabeth's recognized gain on the exchange?

A)zero
B)$95,000
C)$75,000
D)$170,000

Question 31

Trudo Corporation has a building that it needs to sell or exchange because of growth in its business.If Trudo sells the building, it will have a gain of $450,000.What is the amount of taxes that Trudi will avoid paying if it can exchange the building? The corporation has $1,000,000 of taxable income from operations for the current year.

A)$94,500
B)$153,000
C)$175,500
D)$450,000

Question 32

In early 2019, Conrad Corporation discovered their bookkeeper had embezzled $30,000 over the last three years at a rate of approximately $10,000 per year.Conrad also suffered uninsured hurricane damage of $40,000 late in 2019 in a presidentially declared disaster area.If Conrad wants to deduct its losses at the earliest time possible, what are the amounts (before any limitations) and year(s) of its loss deduction?

A)2019 = $70,000
B)2018 = $30,000, 2019 = $40,000
C)2018 = $40,000, 2019 = $30,000
D)2017 = $10,000, 2018 = $10,000; 2017 = $50,000

Question 33

Georgia's home was damaged by flood.Its adjusted basis before the flood was $90,000.Georgia deducted a $50,000 casualty loss on her tax return and she was able to have the house repaired for $40,000.What is Georgia's basis in the house after the repairs?

A)$ 40,000
B)$ 80,000
C)$ 90,000
D)$125,000

Question 34

Sam's land was condemned for a sewage treatment plant.He received $600,000 for the land that had a basis of $650,000.What is his realized and recognized gain or (loss), respectively, on this involuntary conversion?

A)($50,000), ($50,000)
B)($50,000), 0
C)$50,000, $50,000
D)0, 0

Question 35

Juan owned a small rental property, which was condemned by the county to expand a local park.His adjusted basis in the property was $40,000 and he received a payment of $75,000 from the county.A year later he purchased a similar piece of real estate for $70,000.What is Juan's recognized gain on the involuntary conversion of his rental property?

A)$5,000
B)$10,000
C)$30,000
D)$35,000

Question 36

Which of the following is not a characteristic of involuntary conversions?

A)Gain only is deferred
B)The taxpayer can receive cash to invest in qualifying replacement property
C)The provision applies to both realty and personalty
D)All of these are characteristics

Question 37

Conrad corporation's warehouse was destroyed by a hurricane in September 2019.The estimated fair market value before the hurricane was $750,000 and Conrad's adjusted basis in the warehouse was $450,000.Insurance paid $725,000 as a result of this event.Conrad purchased a new Warehouse in December of 2019 for $700,000.What is Conrad's deductible loss or recognized gain?

A)zero deductible loss or recognized gain
B)$25,000 recognized gain
C)$450,000 deductible loss
D)$750,000 deductible loss

Question 38

Twining Corporation has some land it wants to trade for a building owned by Clopp Corporation.Clopp does not want to exchange the building because it wants to recognize its loss on the building.Twining, however, does not want to recognize its gain.What alternative(s) does Twining have that will allow it to avoid recognizing gain?

A)Twining can sell its land to a third party and take the money and purchase the building.
B)Twining can have a third party purchase the building and have the third party trade for the land.
C)Twining can complete a nonsimulataneous exchange within one year of identifying the desired property.
D)All of the above are acceptable alternatives.

Question 39

Elizabeth exchanges an office building valued at $400,000 with a $75,000 mortgage and adjusted basis of $180,000 for land valued at $275,000.What is Elizabeth's realized gain on the exchange?

A)zero
B)$95,000
C)$75,000
D)$170,000

Question 40

James corporation exchanges a building (fair market value = $800,000, adjusted basis = $600,000) that has a $100,000 mortgage for another building owned by Pete Corporation (fair market value = $1,100,000, adjusted basis = $600,000) that is encumbered by a $400,000 mortgage.Each party assumed the mortgage on the building received.What are James's and Pete's recognized gains on the exchange, respectively?

A)0, 0
B)0, $300,000
C)$100,000, 0
D)$100,000, $400,000

Question 41

Four shareholders form a new corporation in exchange for stock with a fair market value of $1,000 per share.Benjamin transfers investment land (current fair market value of $35,000) that he purchased 10 year ago for $15,000.In exchange, Benjamin receives 30 shares of stock and $5,000 cash.Andrew transfers a machine with a basis of $45,000 and a fair market value of $35,000.Andrew receives 30 shares of stock and $5,000 cash.Emily transfers a rental office building (current fair market value of $45,000) that she purchased 20 years ago for $60,000.Its current basis is $15,000 after recognition of $45,000 in depreciation expense.The corporation assumes the $20,000 balance on the original mortgage and Emily receives 25 shares of stock from the corporation in the exchange.Jackson provided the legal services to organize the corporation (value $5,000) and contributes $10,000 in cash in exchange for 15 shares of stock.How much income or gain does Jackson recognize?

A)$0
B)$5,000
C)$10,000
D)$15,000

Question 42

Marvin sold his sister, Sue, some stock for $20,000 purchased two years ago for $25,000.Nine months later, Sue sold the stock for $27,000.How much gain does Sue recognize on the sale?

A)$7,000
B)$3,000
C)$2,000
D)0

Question 43

All of the following are deferral provisions except:

A)Sale of a personal residence
B)Like-kind exchange
C)Exchange of a life insurance contract for an annuity contract
D)Property transfers pursuant to divorce proceedings

Question 44

Four shareholders form a new corporation in exchange for stock with a fair market value of $1,000 per share.Benjamin transfers investment land (current fair market value of $35,000) that he purchased 10 year ago for $15,000.In exchange, Benjamin receives 30 shares of stock and $5,000 cash.Andrew transfers a machine with a basis of $45,000 and a fair market value of $35,000.Andrew receives 30 shares of stock and $5,000 cash.Emily transfers a rental office building (current fair market value of $45,000) that she purchased 20 years ago for $60,000.Its current basis is $15,000 after recognition of $45,000 in depreciation expense.The corporation assumes the $20,000 balance on the original mortgage and Emily receives 25 shares of stock from the corporation in the exchange.Jackson provided the legal services to organize the corporation (value $5,000) and contributes $10,000 in cash in exchange for 15 shares of stock.What is Andrew's basis for the stock he receives?

A)$10,000
B)$35,000
C)$40,000
D)$45,000

Question 45

Lucas transfers investment land to a corporation as part of a Section 351 transaction.The land has a fair market value of $75,000, an adjusted basis of $30,000, and is encumbered by a mortgage (from its original purchase five years ago by Lucas) of $40,000 that the corporation assumes.In exchange for the land, the corporation issues stock to Lucas worth $35,000.How much gain does Lucas recognize, what is Lucas's stock basis, and what is the basis of the land to the corporation, respectively?

A)$0 gain; $30,000 stock basis; $30,000 land basis
B)$10,000 gain; $0 stock basis; $40,000 land basis
C)$10,000 gain; $10,000 stock basis; $30,000 land basis
D)$0 gain; $0 stock basis; $30,000 land basis

Question 46

On January 31, year 6, Roy sold investment property he purchased five years ago for $10,000 to Hal for $18,000 Hal made a $8,000 down payment on the date of sale, a $6,000 payment on January 31 of year 2 and the balance on January 31, year 3.In addition, the Hal paid 6 percent interest on the unpaid balance.How much income should Roy recognize in years 1, 2, and 3 assuming he used the installment method?

A)$8,000 in year 1
B)$7,778 in year 2
C)$4,444 in year 1
D)$4,000 in year 2

Question 47

As part of a divorce decree, Janet must give her ex-spouse Herman her half-interest in stock with a total value of $120,000 (total basis = $70,000) in exchange for his half-interest in their home with a total value of $150,000 and a basis of $130,000.What are Janet and Herman's realized and recognized gains or losses on this exchange? Janet: Realized Recognized Herman: Realized Recognized

A)$30,000 $30,000 ($20,000) ($20,000)
B)$30,000 0 $20,000 0
C)$40,000 0 ($5,000) 0
D)$40,000 $10,000 ($5,000) ($5,000)

Question 48

Simon purchased 1,000 shares of ABC stock for $8,000 on April 4.On March 1 he had sold 1,500 shares of ABC stock for $9,000 that he had purchased three months earlier for $15,000.What is Simon's realized and recognized loss, respectively, on the March 1 stock sale?

A)$6,000, $6000
B)$6,000, 0
C)$6,000, $4,000
D)$4,000, $6,000

Question 49

Kaitlin purchased 100 shares of Norton Corporation stock for $11,500 on January 1, 2016.March 1, 2019, she purchased 30 additional shares of Norton Corporation for $3,000.On March 20, 2019, she sold 25 shares of the 100 shares she had purchased in 2016, for $2,500.What is Kaitlin's recognized gain or loss on the sale of the stock?

A)$500 recognized loss
B)$375 recognized loss
C)$375 recognized gain
D)$0 recognized gain or loss

Question 50

Zoey contributed property with a tax basis of $25,000 and a fair market value of $60,000 to a newly formed partnership in exchange for a 40 percent interest.How much income must Zoey recognize as a result of the transaction?

A)$60,000
B)$35,000
C)$25,000
D)0

Question 51

Four shareholders form a new corporation in exchange for stock with a fair market value of $1,000 per share.Benjamin transfers investment land (current fair market value of $35,000) that he purchased 10 year ago for $15,000.In exchange, Benjamin receives 30 shares of stock and $5,000 cash.Andrew transfers a machine with a basis of $45,000 and a fair market value of $35,000.Andrew receives 30 shares of stock and $5,000 cash.Emily transfers a rental office building (current fair market value of $45,000) that she purchased 20 years ago for $60,000.Its current basis is $15,000 after recognition of $45,000 in depreciation expense.The corporation assumes the $20,000 balance on the original mortgage and Emily receives 25 shares of stock from the corporation in the exchange.Jackson provided the legal services to organize the corporation (value $5,000) and contributes $10,000 in cash in exchange for 15 shares of stock.What is Benjamin's realized and recognized gain, respectively?

A)$5,000, $20,000
B)$10,000, $15,000
C)$15,000, $10,000
D)$20,000, $5,000

Question 52

In 2019, Larry's car, which he purchased six years ago for $6,000, was demolished in a traffic accident.As a result of the delay caused by this accident, Larry missed a business meeting and lost out on an important sale on which he could have earned a $1,200 commission.When he arrived home, he found his house had been broken into and his personal video equipment currently worth $3,200 (original cost = $5,000) had been stolen, along with his baseball card collection valued at $2,000 (basis = $1,500).Larry's homeowner's policy covered only $3,000 of this theft loss.He had dropped the collision coverage on his auto insurance policy because that portion was too expensive, so he had no insurance coverage for his auto accident.His adjusted gross income is $82,000 and the fair market value of the car at the time of the accident was $8,000.How much can Larry deduct as an itemized deduction for his casualty and theft losses in 2019?

A)zero
B)$2,100
C)$2,700
D)$3,700

Question 53

A transfers machines valued at $170,000 (basis = $150,000) along with $30,000 cash to AB Corporation and B transfers real property valued at $320,000 (basis = $310,000) to the corporation.A receives 40 percent of the outstanding stock and B receives 60 percent.B also receives $20,000 from the corporation.What are A's and B's recognized gains, respectively, on these transfers?

A)$20,000, 0
B)0, $20,000
C)0, $10,000
D)0, 0

Question 54

Four shareholders form a new corporation in exchange for stock with a fair market value of $1,000 per share.Benjamin transfers investment land (current fair market value of $35,000) that he purchased 10 year ago for $15,000.In exchange, Benjamin receives 30 shares of stock and $5,000 cash.Andrew transfers a machine with a basis of $45,000 and a fair market value of $35,000.Andrew receives 30 shares of stock and $5,000 cash.Emily transfers a rental office building (current fair market value of $45,000) that she purchased 20 years ago for $60,000.Its current basis is $15,000 after recognition of $45,000 in depreciation expense.The corporation assumes the $20,000 balance on the original mortgage and Emily receives 25 shares of stock from the corporation in the exchange.Jackson provided the legal services to organize the corporation (value $5,000) and contributes $10,000 in cash in exchange for 15 shares of stock.What is Emily's basis in the stock she received?

A)0
B)$5,000
C)$15,000
D)$20,000

Question 55

Four shareholders form a new corporation in exchange for stock with a fair market value of $1,000 per share.Benjamin transfers investment land (current fair market value of $35,000) that he purchased 10 year ago for $15,000.In exchange, Benjamin receives 30 shares of stock and $5,000 cash.Andrew transfers a machine with a basis of $45,000 and a fair market value of $35,000.Andrew receives 30 shares of stock and $5,000 cash.Emily transfers a rental office building (current fair market value of $45,000) that she purchased 20 years ago for $60,000.Its current basis is $15,000 after recognition of $45,000 in depreciation expense.The corporation assumes the $20,000 balance on the original mortgage and Emily receives 25 shares of stock from the corporation in the exchange.Jackson provided the legal services to organize the corporation (value $5,000) and contributes $10,000 in cash in exchange for 15 shares of stock.What is Jackson's basis in the stock he received?

A)$0
B)$5,000
C)$10,000
D)$15,000

Question 56

Four shareholders form a new corporation in exchange for stock with a fair market value of $1,000 per share.Benjamin transfers investment land (current fair market value of $35,000) that he purchased 10 year ago for $15,000.In exchange, Benjamin receives 30 shares of stock and $5,000 cash.Andrew transfers a machine with a basis of $45,000 and a fair market value of $35,000.Andrew receives 30 shares of stock and $5,000 cash.Emily transfers a rental office building (current fair market value of $45,000) that she purchased 20 years ago for $60,000.Its current basis is $15,000 after recognition of $45,000 in depreciation expense.The corporation assumes the $20,000 balance on the original mortgage and Emily receives 25 shares of stock from the corporation in the exchange.Jackson provided the legal services to organize the corporation (value $5,000) and contributes $10,000 in cash in exchange for 15 shares of stock.What is the corporation's basis for the building it received from Emily?

A)$10,000
B)$15,000
C)$20,000
D)$35,000

Question 57

Four shareholders form a new corporation in exchange for stock with a fair market value of $1,000 per share.Benjamin transfers investment land (current fair market value of $35,000) that he purchased 10 year ago for $15,000.In exchange, Benjamin receives 30 shares of stock and $5,000 cash.Andrew transfers a machine with a basis of $45,000 and a fair market value of $35,000.Andrew receives 30 shares of stock and $5,000 cash.Emily transfers a rental office building (current fair market value of $45,000) that she purchased 20 years ago for $60,000.Its current basis is $15,000 after recognition of $45,000 in depreciation expense.The corporation assumes the $20,000 balance on the original mortgage and Emily receives 25 shares of stock from the corporation in the exchange.Jackson provided the legal services to organize the corporation (value $5,000) and contributes $10,000 in cash in exchange for 15 shares of stock.How much gain does Emily recognize?

A)0
B)$5,000
C)$15,000
D)$20,000

Question 58

Which of the following is not a required characteristic of a qualifying Section 351 transaction?

A)If more than 20 percent of the stock is transferred for services, property must also be transferred by the service provider.
B)Gain may be recognized if the transferor receives something other than stock.
C)The transferors must control the corporation after the transfer.
D)Control requires shareholders owning only 80 percent of the voting stock if nonvoting stock is outstanding.

Question 59

Sophie received a 30 percent interest in a general partnership in exchange for property valued at $35,000 (adjusted basis = $25,000) and services valued at $5,000.In addition, the partnership assumed the $10,000 liability on the property.What is Sophie's basis in her partnership interest?

A)$20,000
B)$23,000
C)$25,000
D)$39,000

Question 60

Sebastian contributed property with a tax basis of $30,000 and a fair market value of $75,000 to a new partnership in exchange for a 50 percent interest.The property was encumbered by a $50,000 mortgage that the partnership assumed.The other partner contributed $25,000 cash.What is Sebastian's basis in his partnership interest?

A)$5,000
B)$25,000
C)$30,000
D)$50,000

Question 61

Corporation P acquires 95 percent of Corporation T's assets for $19.5 million of P's stock in a qualifying reorganization.The assets transferred have a basis of $14 million.T retained $500,000 of cash to pay its remaining liabilities.It only used $200,000 of the cash and the remaining cash and P stock are distributed to T's shareholder, who has a basis of $14 million in her stock.What is the gain recognized on this reorganization?

A)0
B)$300,000
C)$5.5 million
D)$7.5 million

Question 62

Which type of reorganization does not entail a transfer of assets for stock?

A)Type A
B)Type B
C)Type C
D)Type D

Question 63

Which type of reorganization is a recapitalization?

A)Type B
B)Divisive Type D
C)Type C
D)Type E

Question 64

Which type of reorganization involves only one corporation?

A)Type B
B)Type C
C)Type D
D)Type F

Question 65

A tax-deferred reorganization can involve all of the following except:

A)an exchange of assets for stock in a corporation
B)an exchange of stock in one corporation for stock in another corporation
C)a division of one corporation into two corporations
D)the liquidation of a corporation followed by reincorporation

Question 66

David owns 600 shares of K Corporation stock when K is merged into Parent Corporation.David receives 500 shares of Parent Corporation stock (fair market value = $10,500) and $500 cash in exchange for his K Corporation stock.David's K stock had a basis of $8,000 and an $11,000 fair market value.What is David's realized and recognized gain, respectively?

A)$3,000 and $3,000 b $3,000 and $2,500
C)$2,500 and $500
D)$3,000 and $500

Question 67

Which of the following is not a divisive reorganization?

A)Spin out
B)Split up
C)Spin off
D)Split off

Question 68

Dylan, Luke, and Hannah form a partnership.Dylan contributes land with a fair market value of $25,000 (basis of $15,000) in exchange for a 25% interest.Luke contributes equipment with a $35,000 fair market value (basis of $38,000) in exchange for a 35% interest, and Hannah contributes a building with a $100,000 fair market value (basis = $35,000) and a mortgage of $60,000 (assumed by the partnership) in exchange for a 40% interest.What is Dylan's basis in his partnership interest?

A)$15,000
B)$25,000
C)$30,000
D)$60,000

Question 69

Dylan, Luke, and Hannah form a partnership.Dylan contributes land with a fair market value of $25,000 (basis of $15,000) in exchange for a 25% interest.Luke contributes equipment with a $35,000 fair market value (basis of $38,000) in exchange for a 35% interest, and Hannah contributes a building with a $100,000 fair market value (basis = $35,000) and a mortgage of $60,000 (assumed by the partnership) in exchange for a 40% interest.What is Hannah's basis in her partnership interest?

A)$0
B)$1,000
C)$5,000
D)$65,000

Question 70

Dylan, Luke, and Hannah form a partnership.Dylan contributes land with a fair market value of $25,000 (basis of $15,000) in exchange for a 25% interest.Luke contributes equipment with a $35,000 fair market value (basis of $38,000) in exchange for a 35% interest, and Hannah contributes a building with a $100,000 fair market value (basis = $35,000) and a mortgage of $60,000 (assumed by the partnership) in exchange for a 40% interest.How much gain does Hannah recognize?

A)$0
B)$1,000
C)$5,000
D)$65,000

Question 71

Cal contributes property valued at $50,000 (adjusted basis = $30,000) to a partnership in exchange for a partnership interest valued at $40,000 and $10,000 cash.What is Cal's recognized gain or loss on these transfers?

A)0
B)$4,000
C)$10,000
D)$20,000

Question 72

In a qualified reorganization:

A)Gain is generally deferred.
B)Only stock can be exchanged for stock.
C)One corporation must acquire all the assets of another corporation.
D)Two or more corporations are always involved.

Question 73

Dylan, Luke, and Hannah form a partnership.Dylan contributes land with a fair market value of $25,000 (basis of $15,000) in exchange for a 25% interest.Luke contributes equipment with a $35,000 fair market value (basis of $38,000) in exchange for a 35% interest, and Hannah contributes a building with a $100,000 fair market value (basis = $35,000) and a mortgage of $60,000 (assumed by the partnership) in exchange for a 40% interest.What is Luke's basis in his partnership interest?

A)$35,000
B)$38,000
C)$56,000
D)$59,000

Question 74

Which type of reorganization does not allow the parent corporation to make a qualifying transfer to a subsidiary of the property received in the reorganization?

A)Type A
B)Type B
C)Type C
D)Type D

Question 75

Which type of reorganization always involves an exchange of stock for stock?

A)Type A
B)Type B
C)Type C
D)Type D

Question 76

Which of the following characteristics is the same for transfers of property to both a corporation and to a partnership in exchange solely for an ownership interest?

A)The transferors must have control of the corporation or partnership after the transfer.
B)Liabilities assumed affect the owner's basis in the entity's business in the same manner.
C)Loss is not recognized.
D)The holding period for all the assets transferred begins on the date of the transfer.

Question 77

Dylan, Luke, and Hannah form a partnership.Dylan contributes land with a fair market value of $25,000 (basis of $15,000) in exchange for a 25% interest.Luke contributes equipment with a $35,000 fair market value (basis of $38,000) in exchange for a 35% interest, and Hannah contributes a building with a $100,000 fair market value (basis = $35,000) and a mortgage of $60,000 (assumed by the partnership) in exchange for a 40% interest.What is the partnership's basis in the building it received from Hannah?

A)$35,000
B)$60,000
C)$65,000
D)$100,000