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

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Question 51

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The nonrecognition of gains and losses under § 1031 is mandatory for gains and elective for losses.

A) True
B) False

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Question 52

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Jake exchanges land used in his business for a different parcel of land to be used in his business. His adjusted basis for $325,000 and the fair market value is $310,000. The fair market value of the new parcel of land is $300,000. In additi receives cash of $10,000. Calculate Jake's realized and recognized gain or loss and his adjusted basis for the assets r

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Question 53

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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.

Arthur owns a tract of undeveloped land (adjusted basis of $145,000) which he sells to his son, Ned, for its fair market value of $105,000. What is Arthur's recognized gain or loss and Ned's basis in the land?

Molly exchanges land (adjusted basis of $85,000? fair market value of $78,000) used in her business and common stock held for investment (adjusted basis of $10,000? fair market value of $15,000) for a single parcel of land (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?

Nancy and Tonya exchanged assets. Nancy gave Tonya her personal residence with an adjusted basis of $280,000 and a fair market value of $560,000. The house has a mortgage of $200,000 which is assumed by Tonya. Tonya gave Nancy a yacht used in her business with an adjusted basis of $250,000 and a fair market value of $360,000. What is Tonya's realized and recognized gain?

Eunice Jean exchanges land held for investment located in Rolla, Missouri, for land to be held for investment located near Madrid, Spain. Her basis for the land given up is $450,000 and the fair market value of the land received is $500,000. Eunice Jean also receives cash of $45,000. a. What is Eunice Jean's recognized gain? b. What is her basis for the land received?

Transactions between related parties that result in disallowed losses might later provide a tax benefit to the related party buyer.

If the alternate valuation date is elected by the executor in 2018, the total basis of inherited property will be more than what it would have been if the primary valuation date and amount had been used.

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 of $425,000 from her gross income under § 121 if she and Doug file a joint return.

Paul sells property with an adjusted basis of $45,000 to his daughter Dean, for $38,000. Dean subsequently sells the property to her brother, Preston, for $38,000. Three years later, Preston sells the property to Hun, an unrelated party, for $50,000. What is Preston's recognized gain or loss on the sale of the property to Hun?

Melvin receives stock as a gift from his uncle. No gift tax is paid. The adjusted basis of the stock is $30,000 and the fair market value is $38,000. Melvin trades the stock for bonds with a fair market value of $35,000 and $3,000 cash. What is his recognized gain and the basis for the bonds?

Discuss the application of holding period rules to property acquired by gift and inheritance.

Which of the following statements is correct with respect to qualified replacement property in a § 1033 involuntary conversion?

Karen purchased 100 shares of Gold Corporation stock for $11,500 on January 2, 2018. During 2018, she sells 25 shares of the 100 shares purchased on January 2, 2018, for $2,500. Twenty-five days earlier, she had purchased 30 shares for $3,000. What is Karen's recognized gain or loss on the sale of the stock, and what is her basis in the 30 shares purchased 25 days earlier?

Evelyn's office building is destroyed by fire on July 12, 2018. The adjusted basis is $315,000. She receives insurance proceeds of $350,000 on August 31, 2018. Calculate the amount that Evelyn must reinvest in qualifying property in order that her recognized gain be $20,000. Assume she elects § 1033 (nonrecognition of gain from an involuntary conversion) postponement treatment.

In determining the basis of like-kind property received, postponed losses are:

The adjusted basis for a taxable bond purchased at a premium is reduced if the amortization election is made. The amount of the amortized premium is treated as an interest deduction.

Which, if any, of the following exchanges qualifies for nonrecognition treatment as a § 1031 like-kind exchange?

Alvin is employed by an automobile dealership as its manager. As such, he purchased an SUV for $32,000 (fair market value is $48,000) . No other employees are permitted a discount. What is Alvin's basis in the SUV?