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Exam 15: Property Transactions: Nontaxable Exchanges

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Question 51

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Janet,age 68,sells her principal residence for $500,000.She purchased it twenty-two years ago for $150,000.Selling expenses are $30,000 and repair expenses to get the house in a marketable condition to sell are $15,000.Janet's objective is to minimize the taxes she must pay associated with the sale.Calculate her recognized gain.

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The repair expenses...

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Question 52

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

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Question 53

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Discuss the treatment of realized gains from involuntary conversions.

A building located in Virginia (used in business)exchanged for a building located in France (used in business)cannot qualify for like-kind exchange treatment.

Discuss the relationship between the postponement of realized gain under § 1031 (like-kind exchanges)and the adjusted basis and holding period for the replacement property.

Maud exchanges a rental house at the beach with an adjusted basis of $475,000 and a fair market value of $460,000 for a rental house at the mountains with a fair market value of $400,000 and cash of $60,000.What is the recognized gain or loss?

Under what circumstance is there recognition of some or all of the realized gain associated with the giving of boot by the taxpayer in a like-kind exchange?

Eva exchanges a pick-up truck that she has held for personal use plus $19,000 for a new pick-up truck which she will use exclusively in her sole proprietorship business.This exchange qualifies for nontaxable exchange treatment.

Use the following data to determine the sales price of Etta's principal residence and the realized gain.She is not married.The sale of the old residence qualifies for the § 121 exclusion.

Which of the following statements is correct?

If boot in the form of cash is given in a § 1031 like-kind exchange,the realized gain may be recognized.

If the taxpayer qualifies under § 1033 (nonrecognition of gain from an involuntary conversion) ,makes the appropriate election,and the amount reinvested in replacement property is less than the amount realized,realized gain is:

During 2012,Howard and Mabel,a married couple,decided to sell their residence.The residence has a basis of $162,000 and has been owned and occupied by them for 11 years.To make it more attractive to prospective buyers,they had it painted in April at a cost of $5,000.The house was sold in May for $395,000 with broker's commissions and other selling expenses being $24,000.They purchased a new residence in June for $400,000.What is the adjusted basis of the new residence?

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

Agnes,a calendar year taxpayer,lists her principal residence with a realtor on January 7,2012,enters into a contract to sell on March 5,2012,and sells (i.e.,the closing date) the residence on May 15,2012.The realized gain on the sale is $240,000.Which date is the appropriate ending date in determining if the residence has been owned and used by the taxpayer as the principal residence for at least two years during the prior five-year period?

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

Distinguish between a direct involuntary conversion and an indirect involuntary conversion.

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.

Larry,who lived in Maine,acquired a personal residence eight years ago when he was 42 years old.During this period he has occupied the residence for only nine months (out of 12)each year due to winter vacations in Florida.Is Larry eligible for exclusion of gain under § 121?

Moss exchanges a warehouse for a building he will use as an office building.The adjusted basis of the warehouse is $600,000 and the fair market value of the office building is $350,000.In addition,Moss receives cash of $150,000.What is the recognized gain or loss and the basis of the office building?