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

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Question 41

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

A) True
B) False

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Question 42

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Omar has the following stock transactions during 2017: ​ a.​​What is Omar's recognized gain or loss on the stock sales if his objective is to minimize the recognized gain and to maximize the recognized loss? b.What is Omar's recognized gain or loss if he does not identify the shares sold?​

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Sale of Blue stock
​
S...

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Question 43

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The holding period of property acquired by gift may begin on:

If boot is received in a § 1031 like-kind exchange and gain is recognized,which formula correctly calculates the basis for the like-kind property received?

In order to qualify for like-kind exchange treatment under § 1031,which of the following requirements must be satisfied?

The exchange of unimproved real property located in Topeka (KS) for improved real property located in Atlanta (GA) does not qualify as a like-kind exchange.

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?

The bank forecloses on Lisa's apartment complex.The property had been pledged as security on a nonrecourse mortgage,whose principal amount at the date of foreclosure is $750,000.The adjusted basis of the property is $480,000,and the fair market value is $750,000.What is Lisa's recognized gain or loss?

Reggie owns all the stock of Amethyst,Inc.(adjusted basis of $100,000).If he receives a distribution from Amethyst of $90,000 and corporate earnings and profits are $15,000,Reggie has a capital gain of $5,000 and an adjusted basis for his Amethyst stock of $0.

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.

Parker bought a brand new Ferrari on January 1,2017,for $125,000.Parker was fatally injured in an auto accident on June 23,2017,when the fair market value of the car was $105,000.Parker was driving a loaner car from the Ferrari dealership while his car was being serviced.In his will,Parker left the Ferrari to his best friend,Ryan.Ryan's holding period for the Ferrari begins on January 1,2017.

Molly exchanges a small machine (adjusted basis of $85,000; fair market value of $78,000) used in her business and investment land (adjusted basis of $10,000; fair market value of $15,000) for a large machine (fair market value of $93,000) to be used in her business in a like-kind exchange.What is Molly's recognized gain or loss?

Kendra owns a home in Atlanta.Her company transfers her to Chicago on January 2,2017,and she sells the Atlanta house in early February 2017.She purchases a residence in Chicago on February 3,2017.On December 15,2017,Kendra's company transfers her to Los Angeles.In January 2018,she sells the Chicago residence and purchases a residence in Los Angeles.Because multiple sales have occurred within a two-year period,§ 121 treatment does not apply to the sale of the second home.

Fran was transferred from Phoenix to Atlanta.She sold her Phoenix residence (adjusted basis of $250,000) for a realized loss of $50,000 and purchased a new residence in Atlanta for $375,000.Fran had owned and lived in the Phoenix residence for 6 years.What is Fran's recognized gain or loss on the sale of the Phoenix residence and her basis for the residence in Atlanta?

What effect do the assumption of liabilities have on a § 1031 like-kind exchange?

Nigel purchased a blending machine for $125,000 for use in his business.As to the machine,he has deducted MACRS cost recovery of $31,024,maintenance costs of $5,200,and repair costs of $4,000.Calculate Nigel's adjusted basis for the machine.

Noelle received dining room furniture as a gift from her friend,Jane.Jane's adjusted basis was $9,200 and the fair market value on the date of the gift was $7,000.Noelle decided she did not need the furniture and sold it to a neighbor six months later for $6,500.What is her recognized gain or loss?

A realized gain whose recognition is postponed results in the temporary recovery of more than the taxpayer's cost or other basis.

Shari exchanges an office building in New Orleans (adjusted basis of $700,000) for an apartment building in Baton Rouge (fair market value of $900,000).In addition,she receives $100,000 of cash.Shari's recognized gain is $100,000 and her basis for the apartment building is $800,000 ($700,000 adjusted basis + $100,000 recognized gain).

Byron,who lived in New Hampshire,acquired a personal residence ten years ago when he was 52 years old.During this period he has occupied the residence for only eight months (out of 12) each year due to winter vacations in Florida.Is Byron eligible for exclusion of gain under § 121?