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

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Question 61

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An exchange of two items of personal property (personalty)that belong to different general business asset classes qualifies for nonrecognition under § 1031 as long as both properties are used in the taxpayer's trade or business.

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B) False

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Question 62

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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?

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Generally,the giving of boot by the taxp...

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Question 63

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After 5 years of marriage,Dave and Janet decided to get a divorce.As part of the divorce settlement,Janet transfers to Dave the house she purchased prior to their marriage.Janet's adjusted basis for the house is $230,000 and the fair market value is $410,000 on the date of the transfer.What are the tax consequences to Janet and to Dave as a result of the transfer?

Nontaxable stock dividends result in:

Sam's office building with an adjusted basis of $750,000 and a fair market value of $900,000 is condemned on November 30,2015.Sam is a calendar year taxpayer.He receives a condemnation award of $875,000 on March 1,2016.He builds a new office building at a cost of $845,000 which is completed and paid for on December 31,2018.What is Sam's recognized gain on receipt of the condemnation award and basis for the new office building assuming his objective is to minimize gain recognition?

Which of the following statements is correct for a § 1033 involuntary conversion of an office building which is destroyed by fire?

If property that has been converted from personal use to business use has appreciated in value,its basis for gain will be the same as the basis for loss.

Gil's office building (basis of $225,000 and fair market value $275,000)is destroyed by a hurricane.Due to a 30% co-insurance clause,Gil receives insurance proceeds of $192,500 two months after the date of the loss.One month later,Gil uses the insurance proceeds to purchase a new office building for $275,000.His adjusted basis for the new building is $307,500 ($275,000 cost + $32,500 postponed loss).

If the alternate valuation date is elected by the executor in 2015,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.

Helen purchases a $10,000 corporate bond at a premium of $1,000 and elects to amortize the premium.On the later sale of the bond for $10,800,she has amortized $300 of the premium.Helen has a recognized gain of $800 ($10,800 amount realized - $10,000 adjusted basis).

The taxpayer owns stock with an adjusted basis of $15,000 and a fair market value of $8,000.If the stock or cash is going to be given to her niece,it is preferable for the taxpayer to sell the stock and give the $8,000 of cash to her niece.The same preference would exist if the recipient were a qualified charitable organization.

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

Stuart owns land with an adjusted basis of $190,000 and a fair market value of $500,000.If the property is going to be given to Stuart's nephew,Alex,it is preferable for the transfer to be by inheritance rather than by gift.

Livestock of different sexes can qualify for like-kind exchange treatment if the livestock has been held for over 24 months.

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?

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?

Alice owns land with an adjusted basis of $610,000,subject to a mortgage of $350,000.Real estate taxes are $9,000 per calendar year and are payable on December 31.On April 1,2015,Alice sells her land subject to the mortgage for $650,000 in cash,a note for $600,000,and property with a fair market value of $120,000.What is the amount realized?

Realized gain or loss is measured by the difference between the amount realized from the sale or other disposition of property and the property's adjusted basis at the date of disposition.

Karen owns City of Richmond bonds with a face value of $10,000.She purchased the bonds on January 1,2015,for $11,000.The maturity date is December 31,2024.The annual interest rate is 8%.What is the amount of taxable interest income that Karen should report for 2015,and the adjusted basis for the bonds at the end of 2015,assuming straight-line amortization is appropriate?

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: