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Exam 7: Property Transactions: Basis, gain and Loss, and Nontaxable Exchange

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Question 91

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Section 1033 (nonrecognition of gain from an involuntary conversion)applies to both gains and losses.

A) True
B) False

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Question 92

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A taxpayer who sells his or her principal residence at a realized loss can elect to recognize the loss even if a qualified residence is acquired during the statutory time period.

A) True
B) False

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Question 93

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Mary sells her personal use automobile for $20,000.She purchased the car two years ago for $17,000.What is Mary's recognized gain or loss? It increased in value due to its excellent mileage,yet safe design.

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?

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.

Dennis,a calendar year taxpayer,owns a warehouse (adjusted basis of $190,000)which is destroyed by a tornado in October 2013.He receives insurance proceeds of $250,000 in January 2014.If before 2017,Dennis replaces the warehouse with another warehouse costing at least $250,000,he can elect to postpone the recognition of any realized gain.

Evelyn's office building is destroyed by fire on July 12,2013.The adjusted basis is $315,000.She receives insurance proceeds of $350,000 on August 31,2013.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.

The surrender of depreciated boot (fair market value is less than adjusted basis)in a like-kind exchange can result in the recognition of loss.

Discuss the treatment of realized gains from involuntary conversions.

Annette purchased stock on March 1,2013,for $200,000.At December 31,2013,it was worth $210,000.She also purchased a bond on September 1,2013,for $20,000.At year end,it was worth $15,000.Determine Annette's realized and recognized gain or loss.

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?

What kinds of property do not qualify under the like-kind provisions?

The amount received for a utility easement on land is included in the gross income of the taxpayer.

Noelle owns an automobile which she uses for personal use.Her adjusted basis is $45,000 (i.e.,the original cost) .The car is worth $22,000.Which of the following statements is correct?

Rob was given a residence in 2013.At the time of the gift,the residence had a fair market value of $201,000,and its adjusted basis to the donor was $141,000.The donor paid a gift tax of $10,000 on the taxable gift of $187,000.What is Rob's basis for gain?

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

The basis of boot received in a like-kind exchange is its fair market value,unless the realized gain is a smaller amount.

Discuss the relationship between realized gain and boot received in a § 1031 like-kind exchange.

Milton purchases land and a factory building for his business for $300,000 with $100,000 being allocated to the land.During the first year,Milton deducts cost recovery of $4,922.Milton's adjusted basis for the building at the end of the first year is $195,078 ($200,000 - $4,922).

Shontelle received a gift of income-producing property with an adjusted basis of $49,000 to the donor and fair market value of $35,000 on the date of gift.Gift tax of $6,000 was paid by the donor.Shontelle subsequently sold the property for $31,000.What is the recognized gain or loss?