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

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Question 91

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Terry exchanges real estate (acquired on August 25, 2012) held for investment for other real estate to be held for investment on September 1, 2018. None of the realized gain of $10,000 is recognized, and Terry's adjusted basis for the new real estate is a carryover basis of $80,000. Consequently, Terry's holding period for the new real estate begins on August 25, 2012.

A) True
B) False

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Question 92

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In October 2018, Ben and Jerry exchange investment realty in a § 1031 like-kind exchange. Ben bought his real estate in 2007 while Jerry purchased his in 2010. In addition to the realty, Ben receives Pearl, Inc. stock worth $10,000 from Jerry. Ben's realized gain is $30,000. On what date does the holding period for Ben's realty received from Jerry begin? When does the holding period for the stock he receives begin?

A) 2007, 2018.
B) 2007, 2007.
C) 2010, 2010.
D) 2010, 2018.
E) None of the above.

F) B) and C)
G) D) and E)

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Question 93

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The amount realized does not include any amount received by the taxpayer that is designated as severance damages by both the government and the taxpayer.

Melody's adjusted basis for 10,000 shares of Cardinal, Inc. common stock is $1,000,000. During the year, she receives a 5% stock dividend that is a nontaxable stock dividend. a. What is the amount of Melody's gross income? b. What is Melody's total basis for the stock? c. What is Melody's basis per share?

Carl sells his principal residence, which has an adjusted basis of $150,000 for $200,000. He incurs selling expenses of $20,000 and legal fees of $2,000. He had purchased another residence one month prior to the sale for $380,000. What is the recognized gain or loss and the basis of the replacement residence if the taxpayer elects to forgo the §121 exclusion (exclusion of gain on sale of principal residence) ?

Leonore exchanges 5,000 shares of Pelican, Inc., stock for 2,000 shares of Blue Heron, Inc., stock. Leonore's adjusted basis for the Pelican stock is $300,000 and the fair market value of the Blue Heron stock is $350,000. Leonore's recognized gain is $0 and her adjusted basis for the Blue Heron stock is $300,000.

During 2018, 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. 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?

Jacob owns land with an adjusted basis of $140,000 and a fair market value of $115,000. Determine the amount of realized and recognized gain or loss to the seller and the adjusted basis for the buyer for each of the following. a. Jacob sells the land for $115,000 to a corporation in which he owns 60% of the stock. b. Jacob sells the land for $115,000 to a partnership in which he has a capital and profits interest of 60%.

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

Under the Internal Revenue Code, the holding period for property acquired by inheritance is always:

Which of the following is correct?

Define fair market value as it relates to property transactions.

Nat is a salesman for a real estate developer. His employer permits him to purchase a lot for $75,000. The employer's adjusted basis for the lot is $45,000, and its normal selling price is $90,000. What is Nat's recognized gain and his basis for the lot?

The adjusted basis of an asset is the original cost (or basis) plus capital recoveries less capital additions.

If the recognized gain on an involuntary conversion equals the realized gain because of a reinvestment deficiency, the basis of the replacement property will be more than its cost (cost plus realized gain).

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?

Libby's principal residence is destroyed by a tornado. She is single and her realized gain is $360,000. Is it possible for Libby's recognized gain to be $0?

Pam exchanges a rental building, which has an adjusted basis of $520,000, for investment land which has a fair market value of $700,000. In addition, Pam receives $100,000 in cash. What is the recognized gain or loss and the basis of the investment land?

What effect does a deductible casualty loss have on the adjusted basis of property?

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?