Question 1

Kate exchanges land held as an investment for land and a building owned by Clark,to be used in her business.If Clark is Kate's father,her realized gain of $150,000 must be recognized because they are related parties.

Accepted Answer

The answer of Kate exchanges land held as an investment...

Question 2

​Ralph gives his daughter,Angela,stock (basis of $8,000;fair market value of $6,000).No gift tax results.If Angela subsequently sells the stock for $10,000,what is her recognized gain or loss?

Accepted Answer

Since Angela received the stock as a gift, her basis is the same as Ralph's basis (i.e., $8,000). However, when she sells the stock for $10,000, she will only receive $6,000 (i.e., the fair market value at the time of the gift). Therefore, she will recognize a gain of $2,000 ($6,000 sales price - $8,000 basis).

Question 3

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.

Accepted Answer

Under U.S. tax law, properties involved in a like-kind exchange must be located within the United States to qualify for like-kind exchange treatment.

Question 4

Pat owns a 1965 Ford Mustang which he uses for personal use.He purchased it four years ago for $22,000,and it currently is worth $27,000.He exchanges it for a 1979 Triumph Spitfire convertible worth $27,000.Pat's recognized gain is $0 and his adjusted basis for the convertible is $22,000.

Accepted Answer

The answer of Pat owns a 1965 Ford Mustang which...

Question 5

​Milton owns a bond (face value of $25,000) for which he paid $28,000.Which of the following statements is correct?

Accepted Answer

The answer of ​Milton owns a bond (face value of...

Question 6

To qualify as a like-kind exchange,real property must be exchanged either for other real property or for personal property with a statutory life of at least 39 years.

Accepted Answer

To qualify as a like-kind exchange under Section 1031 of the Internal Revenue Code, real property must be exchanged for other real property of a like kind, which can be used for business or investment purposes. Personal property no longer qualifies for like-kind exchanges after the Tax Cuts and Jobs Act of 2017.

Question 7

Lola owns land as an investor.She exchanges the land for a warehouse which she leases to a tenant who uses it to store his business inventory.The exchange does qualify for like-kind exchange treatment.

Accepted Answer

Since both the land and the warehouse are held for investment purposes, and the exchange qualifies for like-kind exchange treatment, it is considered a valid transaction. The use of the warehouse by the tenant does not affect the like-kind exchange treatment.

Question 8

​Alvin is employed by an automobile dealership as its manager.As such,he purchased an SUV for $32,000 (fair market value is $48,000).No other employees are permitted a discount.What is Alvin's basis in the SUV?

Accepted Answer

The answer of ​Alvin is employed by an automobile dealership...

Question 9

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. ​

Accepted Answer

The recognized gain in this scenario is $50,000 ($350,000 - $300,000), and this gain is not offset by any losses or deductions. Therefore, Leonore would need to recognize the gain and her adjusted basis for the Blue Heron stock would be $350,000.

Question 10

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.

Accepted Answer

Section 1031 of the Internal Revenue Code allows for the deferral of capital gains taxes on the exchange of like-kind property used in a trade or business or held for investment. However, it specifically excludes exchanges of inventory, stocks, bonds, notes, other securities, partnership interests, and certificates of trust. Personal property must be of the same general asset or product class to qualify as like-kind.

Question 11

Gains and losses on nontaxable exchanges are deferred because the tax law recognizes that nontaxable exchanges result in a change in the substance but not the form of the taxpayer's relative economic position.

Accepted Answer

Gains and losses on nontaxable exchanges are deferred because the tax law recognizes that these exchanges do not result in an immediate realization of income or loss, allowing the taxpayer to maintain continuity in their investment without immediate tax consequences. The deferral is related to the continuity of investment, not a change in the substance or form of the taxpayer's economic position.

Question 12

Identify two tax planning techniques that can be used to avoid the wash sale disallowance of loss.

Accepted Answer

The answer of Identify two tax planning techniques that can...

Question 13

​Explain how the sale of investment property at a loss to a brother is treated differently from a sale to a nephew.

Accepted Answer

The answer of ​Explain how the sale of investment property...

Question 14

In a nontaxable exchange,recognition is postponed.In a tax-free transaction,nonrecognition is permanent.

Accepted Answer

In a nontaxable exchange, the recognition of gain or loss is postponed, meaning it may be recognized at a later date. In a tax-free transaction, nonrecognition is permanent, meaning the gain or loss is never recognized for tax purposes.

Question 15

In a nontaxable exchange,the replacement property is assigned a carryover basis if there is a realized gain,but receives a new basis if there is a realized loss.

Accepted Answer

In a nontaxable exchange, both the replacement property and the relinquished property retain their original basis, regardless of whether there was a realized gain or loss.

Question 16

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

Accepted Answer

The answer of Livestock of different sexes can qualify for...

Question 17

​Nontaxable stock dividends result in no change to the total basis of the old and new stock,but the basis per share decreases.

Accepted Answer

When stock dividends are nontaxable, the total basis of the old and new stock remains the same, but the basis per share decreases because the stockholder now owns more shares.

Question 18

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

Accepted Answer

Under § 1031, the nonrecognition of gains and losses is mandatory for both gains and losses when the transaction meets the requirements for a like-kind exchange.

Question 19

Abby exchanges an SUV that she has held for personal use plus $24,000 for a new SUV which she will use exclusively in her sole proprietorship business.This exchange qualifies for nontaxable exchange treatment.

Accepted Answer

Exchanging a personal use asset for a business use asset does not qualify for nontaxable exchange treatment. The fair market value of the SUV held for personal use is considered taxable income to Abby.

Question 20

The exchange of unimproved real property located in Topeka (KS) for improved real property located in Atlanta (GA) does not qualify as a like-kind exchange.

Accepted Answer

The exchange of unimproved real property located in Topeka (KS) for improved real property located in Atlanta (GA) can qualify as a like-kind exchange as long as both properties are held for investment or productive use in a trade or business, and both are of like-kind. The fact that one is improved and the other is unimproved does not disqualify the exchange if they are of like-kind.

Quiz 13: Property Transactions: Determination of Gain or Loss, basis Considerations, and Nontaxabl

Kate exchanges land held as an investment for land and a building owned by Clark,to be used in her business.If Clark is Kate's father,her realized gain of $150,000 must be recognized because they are related parties.

Ralph gives his daughter,Angela,stock (basis of $8,000;fair market value of $6,000) .No gift tax results.If Angela subsequently sells the stock for $10,000,what is her recognized gain or loss?

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.

Pat owns a 1965 Ford Mustang which he uses for personal use.He purchased it four years ago for $22,000,and it currently is worth $27,000.He exchanges it for a 1979 Triumph Spitfire convertible worth $27,000.Pat's recognized gain is $0 and his adjusted basis for the convertible is $22,000.

Milton owns a bond (face value of $25,000) for which he paid $28,000.Which of the following statements is correct?

To qualify as a like-kind exchange,real property must be exchanged either for other real property or for personal property with a statutory life of at least 39 years.

Lola owns land as an investor.She exchanges the land for a warehouse which she leases to a tenant who uses it to store his business inventory.The exchange does qualify for like-kind exchange treatment.

Alvin is employed by an automobile dealership as its manager.As such,he purchased an SUV for $32,000 (fair market value is $48,000) .No other employees are permitted a discount.What is Alvin's basis in the SUV?

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.

Gains and losses on nontaxable exchanges are deferred because the tax law recognizes that nontaxable exchanges result in a change in the substance but not the form of the taxpayer's relative economic position.

Identify two tax planning techniques that can be used to avoid the wash sale disallowance of loss.

Explain how the sale of investment property at a loss to a brother is treated differently from a sale to a nephew.

In a nontaxable exchange,recognition is postponed.In a tax-free transaction,nonrecognition is permanent.

In a nontaxable exchange,the replacement property is assigned a carryover basis if there is a realized gain,but receives a new basis if there is a realized loss.

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

Nontaxable stock dividends result in no change to the total basis of the old and new stock,but the basis per share decreases.

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

Abby exchanges an SUV that she has held for personal use plus $24,000 for a new SUV which she will use exclusively in her sole proprietorship business.This exchange qualifies for nontaxable exchange treatment.

The exchange of unimproved real property located in Topeka (KS) for improved real property located in Atlanta (GA) does not qualify as a like-kind exchange.

Quiz 13: Property Transactions: Determination of Gain or Loss, basis Considerations, and Nontaxabl

Kate exchanges land held as an investment for land and a building owned by Clark,to be used in her business.If Clark is Kate's father,her realized gain of $150,000 must be recognized because they are related parties.

​Ralph gives his daughter,Angela,stock (basis of $8,000;fair market value of $6,000) .No gift tax results.If Angela subsequently sells the stock for $10,000,what is her recognized gain or loss?

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.

Pat owns a 1965 Ford Mustang which he uses for personal use.He purchased it four years ago for $22,000,and it currently is worth $27,000.He exchanges it for a 1979 Triumph Spitfire convertible worth $27,000.Pat's recognized gain is $0 and his adjusted basis for the convertible is $22,000.

​Milton owns a bond (face value of $25,000) for which he paid $28,000.Which of the following statements is correct?

To qualify as a like-kind exchange,real property must be exchanged either for other real property or for personal property with a statutory life of at least 39 years.

Lola owns land as an investor.She exchanges the land for a warehouse which she leases to a tenant who uses it to store his business inventory.The exchange does qualify for like-kind exchange treatment.

​Alvin is employed by an automobile dealership as its manager.As such,he purchased an SUV for $32,000 (fair market value is $48,000) .No other employees are permitted a discount.What is Alvin's basis in the SUV?

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.

Gains and losses on nontaxable exchanges are deferred because the tax law recognizes that nontaxable exchanges result in a change in the substance but not the form of the taxpayer's relative economic position.

Identify two tax planning techniques that can be used to avoid the wash sale disallowance of loss.

​Explain how the sale of investment property at a loss to a brother is treated differently from a sale to a nephew.

In a nontaxable exchange,recognition is postponed.In a tax-free transaction,nonrecognition is permanent.

In a nontaxable exchange,the replacement property is assigned a carryover basis if there is a realized gain,but receives a new basis if there is a realized loss.

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

​Nontaxable stock dividends result in no change to the total basis of the old and new stock,but the basis per share decreases.

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

Abby exchanges an SUV that she has held for personal use plus $24,000 for a new SUV which she will use exclusively in her sole proprietorship business.This exchange qualifies for nontaxable exchange treatment.

The exchange of unimproved real property located in Topeka (KS) for improved real property located in Atlanta (GA) does not qualify as a like-kind exchange.

Ralph gives his daughter,Angela,stock (basis of $8,000;fair market value of $6,000) .No gift tax results.If Angela subsequently sells the stock for $10,000,what is her recognized gain or loss?

Milton owns a bond (face value of $25,000) for which he paid $28,000.Which of the following statements is correct?

Alvin is employed by an automobile dealership as its manager.As such,he purchased an SUV for $32,000 (fair market value is $48,000) .No other employees are permitted a discount.What is Alvin's basis in the SUV?

Explain how the sale of investment property at a loss to a brother is treated differently from a sale to a nephew.

Nontaxable stock dividends result in no change to the total basis of the old and new stock,but the basis per share decreases.