FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 13: Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 1

Essay

Review LaterAdd Note

Review Later

For each of the following involuntary conversions, determine if the property qualifies as replacement property. a. Chuck's restaurant building is destroyed by fire. He clears the site and builds another restaurant building. b. Diane's warehouse which she used for storing inventory is destroyed by a tornado. She purchases another warehouse in which she will store inventory. c. Part of Andrew's dairy farm land is condemned to make way for an interstate highway. He uses the condemnation proceeds to construct a barn to be used for storing cattle feed. d. Liz owns a shopping mall which is destroyed by a flood. Since the tenant occupancy rate was down, she uses the insurance proceeds to purchase an office building which she will rent to tenants. e. Eleanor's Maserati Gran Turismo is stolen. The original cost was $125,000, and she had used it exclusively for personal use. Due to the limited supply of this model, it had appreciated in value. Eleanor received insurance proceeds of $130,000 and uses the proceeds to purchase a replacement Gran Turismo.

Correct Answer

verified

All of the replacements qualify as repla...

View Answer

Show Answer

Question 2

Essay

Review LaterAdd Note

Review Later

Ken is considering two options for selling land for which he has an adjusted basis of $100,000 and on which there is a mortgage of $80,000. Under the first option, Ken will sell the land for $225,000 with a stipulation in the sales contract that he liquidate the mortgage before the sale is complete. Under the second option, Ken will sell the land for $145,000 and the buyer will assume the mortgage. Calculate Ken's recognized gain under both options.

Correct Answer

verified

Since the liability assumption...

View Answer

Show Answer

Question 3

Multiple Choice

Review LaterAdd Note

In addition to other gifts, Megan made a gift of stock to Jeri in 1976. Megan had purchased the stock in 1974 for $7,500. At the time of the gift, the stock was worth $20,000. If Megan paid $850 of gift tax on the transaction in 1976, what is Jeri's gain basis for the stock?

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

Wyatt sells his principal residence in December 2014 and qualifies for the § 121 exclusion. He sells another principal residence in November 2015. Under no circumstance can Wyatt qualify for the § 121 exclusion on the sale of the second residence.

The holding period of replacement property where the election to postpone gain is made includes the holding period of the involuntarily converted property.

In computing the amount realized when the fair market value of the property received cannot be determined, the fair market value of the property surrendered may be used.

Gene purchased an SUV for $45,000 which he uses 100% for personal purposes. When the SUV is worth $30,000, he contributes it to his business. The gain basis is $45,000, the loss basis is $30,000, and the basis for cost recovery is $45,000.

Robert and Diane, husband and wife, live in Pennsylvania, a common law state. They purchased land as joint tenants in 2010 for $300,000. In 2014, Diane dies and bequeaths her share of the land to Robert. The land has a fair market value of $450,000. What is Robert's adjusted basis for the land?

Taylor inherited 100 acres of land on the death of his father in 2014. A Federal estate tax return was filed and this land was valued therein at $650,000, its fair market value at the date of the father's death. The father had originally acquired the land in 1968 for $112,000 and prior to his death he had expended $20,000 on permanent improvements. Determine Taylor's holding period for the land.

To qualify as a like-kind exchange, real property must be exchanged either for other real property or for personal property with a statutory life of at least 39 years.

Discuss the treatment of realized gains from involuntary conversions.

Elvis owns all of the stock of White Corporation. The accumulated earnings and profits of White Corporation at the beginning of the year are a deficit of $20,000. The current earnings and profits are $30,000. Elvis' basis for his stock is $250,000. He receives a distribution of $300,000 on the last day of the tax year. How much dividend income and/or capital gain should Elvis report?

The carryover basis to a donee for property received by gift can be an amount greater than the donor's adjusted basis.

In a casualty or theft, the basis of property involved is reduced by the amount of insurance proceeds received and by any resulting recognized loss.

If boot is received in a § 1031 like­kind exchange, the recognized gain cannot exceed the realized gain.

Peggy uses a delivery van in her business. The adjusted basis is $39,000, and the fair market value is $34,000. The delivery van is stolen and Peggy receives insurance proceeds of $34,000. Determine Peggy's realized and recognized gain or loss.

Neal and his wife Faye reside in Texas, a community property state. Their community property consists of real estate (adjusted basis of $800,000; fair market value of $6 million) and personal property (adjusted basis of $390,000; fair market value of $295,000) . Neal dies first and leaves his estate to Faye. What is Faye's basis in the property after Neal's death?

Which of the following satisfy the time period requirement for postponement of gain as a § 1033 (nonrecognition of gain from an involuntary conversion) involuntary conversion?

Faith inherits an undivided interest in a parcel of land from her father on February 15, 2014. Her father purchased the land on August 25, 1987 and his basis for the land was $325,000. The fair market value of the land is $12,500,000 on the date of her father's death and is $11,000,000 six months later. The executor elects the alternate valuation date. Faith has nine brothers and sisters and each inherited a one-tenth interest. a. What is Faith's adjusted basis for her one­tenth undivided interest in the land? b. What is her holding period for the land?