Question 1

Landry exchanged land with an adjusted basis of $50,000 for another parcel of land worth $35,000 plus $10,000 of cash. Landry held the original land for investment purposes and will do the same with the new parcel. Due to the exchange, Landry will recognize

Accepted Answer

Like-kind exchanges of property held for productive use in a trade or business or for investment are tax-deferred under IRC Sec. 1031.

Question 2

An investor exchanges an office building located in Niagara Falls, NY, for an office building located in Niagara Falls, Ontario. The exchange does not qualify as like- kind.

Accepted Answer

The exchange does not qualify as like-kind because the properties are in different countries. Like-kind exchanges apply only to properties within the same country.

Question 3

A taxpayer conducts a qualifying like- kind exchange. There is no boot involved in the transaction. The basis of the property received will equal the adjusted basis of the property exchanged.

Accepted Answer

In a qualifying like-kind exchange, the basis of the property received is equal to the adjusted basis of the property exchanged when there is no boot involved in the transaction.

Question 4

Dean exchanges a business storage facility with a $120,000 adjusted basis for $40,000 cash and a parking lot with a $140,000 FMV. What is the amount of gain which Dean recognizes on the exchange?

Accepted Answer

The answer of Dean exchanges a business storage facility with...

Question 5

Real property exchanged for personal property, both held for productive use in a business, qualifies as a like- kind exchange.

Accepted Answer

The answer of Real property exchanged for personal property, both...

Question 6

A sole proprietor exchanges an office building used in her business for undeveloped land she plans to hold for investment purposes. The exchange will qualify as like- kind.

Accepted Answer

Both the office building and the undeveloped land are considered real property, so they are like-kind assets for the purpose of a 1031 exchange. The fact that the sole proprietor plans to hold the land for investment purposes does not disqualify the exchange as like-kind.

Question 7

If related taxpayers exchange property qualifying for a like- kind exchange, the properties must be retained for three years after the exchange to prevent recognition of gain resulting from the original exchange on a subsequent disposition of the property.

Accepted Answer

The answer of If related taxpayers exchange property qualifying for...

Question 8

Ella needs to move her business to a larger facility. She projects a large realized gain on the sale of the old building and prefers not to pay tax on the gain because the sales proceeds are needed to finance the purchase of the new building. In the circumstances, a direct two- or three- party like- kind exchange is not feasible. Ella's sale can still qualify for like- kind treatment if she arranges an appropriate nonsimultaneous exchange. Among other criteria, after the transfer of the old building, the replacement property must be

Accepted Answer

In a like-kind exchange, the replacement property must be identified within 45 days and received within 180 days of the transfer of the old property.

Question 9

The basis of non- like- kind property received is the basis in the hands of the transferor at the date of the exchange.

Accepted Answer

The basis of non-like-kind property received in an exchange is generally its fair market value at the time of the exchange, not the basis in the hands of the transferor.

Question 10

The holding period for boot property received begins on the day after the date of the exchange.

Accepted Answer

This statement is true according to the tax laws governing like-kind exchanges under Section 1031 of the Internal Revenue Code. The holding period for the boot property received in a 1031 exchange starts on the day after the date of the exchange.

Question 11

All of the following qualify as a like- kind exchange except

Accepted Answer

The answer of All of the following qualify as a...

Question 12

The receipt of boot as part of a nontaxable exchange causes a realized loss to be recognized.

Accepted Answer

The receipt of boot as part of a nontaxable exchange does not cause a realized loss to be recognized.

Question 13

If each party in a like- kind exchange assumes a liability of the other party, only the net liability given or received is boot.

Accepted Answer

This is true. The net liability given or received is considered boot in a like-kind exchange.

Question 14

The holding period of like- kind property received in a nontaxable exchange begins on the day of the exchange.

Accepted Answer

The answer of The holding period of like- kind property...

Question 15

Daniella exchanges business land with a $100,000 adjusted basis for $10,000 cash and business land with a $96,000 FMV. What is the amount of gain recognized on the exchange?

Accepted Answer

Daniella receives $10,000 cash (boot) in the exchange. The gain recognized is the lesser of the realized gain ($6,000) or the boot received ($10,000). Therefore, the recognized gain is $6,000.

Question 16

Which of the following statements with respect to a like- kind exchange is false?

Accepted Answer

A sale of property and subsequent purchase of like-kind property does not always qualify as a like-kind exchange; it must meet specific IRS requirements, including timing and the use of a qualified intermediary.

Question 17

For purposes of nontaxable exchanges, cash and non- like- kind property constitute boot.

Accepted Answer

According to IRS rules, cash and non-like-kind property received in a nontaxable exchange are considered boot and may be subject to taxation.

Question 18

Where non- like- kind property other than cash is received as boot, the amount of the boot is the property's fair market value.

Accepted Answer

This is true according to the rules of tax law. When non-cash property is received as boot in an exchange, the fair market value of the property is used to determine the amount of the boot. This ensures that the tax liability is properly calculated for the exchange.

Question 19

A sale of property and subsequent purchase of like- kind property may be treated as a like- kind exchange if the two transactions are interdependent.

Accepted Answer

A like-kind exchange, also known as a 1031 exchange, allows the taxpayer to defer paying taxes on the sale of property as long as the proceeds are used to purchase like-kind property. In order for the exchange to qualify, the two transactions must be interdependent, meaning that the sale and subsequent purchase are part of the same exchange and the taxpayer cannot have access to the proceeds in between.

Question 20

A owns a ranch in Wyoming, which B offers to purchase. A is not willing to sell the ranch but is willing to exchange the ranch for an apartment complex in Louisiana. The complex is available for sale. B purchases the apartment complex in Louisiana from C and transfers it to A in exchange for A's ranch. The ranch and the complex each have a $1,000,000 fair market value. Which of the following is true?

Accepted Answer

The answer of A owns a ranch in Wyoming, which...

Quiz 16: Tax Deductions and Travel Expenses for Employees and Self-Employed Individuals