Question 1

The involuntary conversion provisions which allow deferral of gain are mandatory.

Accepted Answer

If a gain is realized on an involuntary conversion, deferral is elective.

Question 2

Which of the following statements is not true with regard to like-kind exchanges?

Accepted Answer

C) While gain or loss equal to the difference between the FMV and the adjusted basis of the non-like-kind property surrendered must ordinarily be recognized, if non-like-kind property is a personal-use asset, the loss is not recognized.

Question 3

In order to fully defer the gain realized on the involuntary conversion of property,the taxpayer must acquire qualifying replacement property costing at least as much as the cost of the original property.

Accepted Answer

To defer the full gain, the full proceeds received must be reinvested in qualifying replacement property.

Question 4

Indicate with a "yes" or a "no" which of the following are like-kind exchanges.
a.Computer used in trade or business for office furniture used in trade or business.
b.Apartment building held as an investment for an office building used in trade or business.
c.Land used in trade or business for equipment used in trade or business.
d.Printer used in trade or business for printer used for personal purposes.
e.Exchange of improved real estate held for investment for unimproved real estate held for investment.

Accepted Answer

The answer of Indicate with a "yes" or a "no"...

Question 5

Indicate with a "yes" or a "no" which of the following are like-kind exchanges (assume all assets are held for business or investment purposes).
a.Exchange of common stock held as an investment for land held as an investment.
b.Exchange of farmland for an apartment building.
c.Exchange of office furniture used in trade or business for computer used in a trade or business
d.Exchange of unimproved real estate for improved real estate.
e.Exchange of a pickup truck used in trade or business for bulldozer used in trade or business

Accepted Answer

The answer of Indicate with a "yes" or a "no"...

Question 6

Patricia exchanges office equipment with an adjusted basis of $20,000 for $5,000 cash and office equipment with a fair market value of $12,000.
a.What is the gain or loss realized?
b.What is the gain or loss recognized?
c. What is the adjusted basis of the new office equipment?

Accepted Answer

The answer of Patricia exchanges office equipment with an adjusted...

Question 7

Cheryl owns 200 shares of Cornerstone Corporation common stock which has an adjusted basis of $60,000 and a fair market value of $75,000.John owns 200 shares of Cable Corporation with a $75,000 fair market value.
a.If Cheryl and John exchange their stock,what is the amount of Cheryl's realized gain?
b.If Cheryl and John exchange their stock,what is the amount of Cheryl's recognized gain?

Accepted Answer

The answer of Cheryl owns 200 shares of Cornerstone Corporation...

Question 8

Trent,who is in the business of racing horses,exchanges a racehorse with a basis of $80,000 for $40,000 cash and a trotter (another racehorse) with a $150,000 fair market value.
a.What is the amount of gain realized by Trent?
b.What is the amount of gain recognized by Trent?
c.What is the adjusted basis of the trotter?

Accepted Answer

The answer of Trent,who is in the business of racing...

Question 9

Olivia exchanges land with a $50,000 basis plus marketable securities with a $20,000 basis for a larger parcel of land worth $110,000 in a transaction that otherwise qualifies as a like-kind exchange.The FMV of the land and marketable securities exchanged by Olivia is $75,000 and $35,000 respectively.
a.What is the amount of gain realized and recognized by Olivia on each asset?
b.What is the amount of Olivia's basis in the new land?

Accepted Answer

The answer of Olivia exchanges land with a $50,000 basis...

Question 10

Discuss the basis rules of property received in a nontaxable like-kind exchange.

Accepted Answer

The answer of Discuss the basis rules of property received...

Question 11

Marinda exchanges an office building worth $800,000 (basis is $820,000) for a warehouse worth $850,000.As part of the exchange she also transfers $50,000 worth of securities which she purchased for $40,000.
a. What are Marinda's realized and recognized gains (losses) on the two assets exchanged?
b. What is Marinda's basis in the warehouse acquired?

Accepted Answer

The answer of Marinda exchanges an office building worth $800,000...

Question 12

Eric exchanges a printing press with an adjusted basis of $64,000 for a smaller model with a $100,000 fair market value.In addition,he receives $20,000 of marketable securities.
a.What is the amount of gain realized by Eric?
b.What is the amount of gain recognized by Eric?
c.What is Eric's basis in the new printing press?
d.What is Eric's basis in the marketable securities?

Accepted Answer

The answer of Eric exchanges a printing press with an...

Question 13

Discuss the rules regarding the holding period for like-kind property received in a nontaxable exchange.

Accepted Answer

The answer of Discuss the rules regarding the holding period...

Question 14

Kuda owns a parcel of land she acquired on June 1,2012,as an investment.She exchanges the land on July 5,2017,for a storage building to be used in her business and marketable securities to be held as an investment.On what date does the storage building's holding period begin?

Accepted Answer

A) Since this is a qualifying like-kind exchange, the holding period carries over to the qualifying replacement property.

Question 15

Whitney exchanges timberland held as an investment for undeveloped land with a $300,000 FMV.Whitney's basis for the timberland is $150,000.She also transfers her tractor with a $15,000 basis and a $10,000 FMV as part of the exchange.
a.What is the amount,if any,of gain or loss recognized on the transaction?
b.What is the basis of the undeveloped land?

Accepted Answer

The answer of Whitney exchanges timberland held as an investment...

Question 16

Amelia exchanges a commercial fishing boat with a $350,000 adjusted basis for an airplane with a $560,000 fair market value.Both assets are for her business use.
a.What is the amount of gain or loss realized by Amelia?
b.What is the amount of gain or loss recognized by Amelia?

Accepted Answer

The answer of Amelia exchanges a commercial fishing boat with...

Question 17

All of the following are true except

Accepted Answer

A) A nonsimultaneous exchange can qualify as like-kind exchange if the transactions are interdependent.

Question 18

Kuda owns a parcel of land she acquired on June 1,2012,as an investment.She exchanges the land on July 5,2017,for a storage building to be used in her business and marketable securities to be held as an investment.The marketable securities' holding period begins on

Accepted Answer

D) While the overall transaction qualifies as a like-kind exchange, the securities are considered boot. The holding period for boot begins on the day after the transaction.

Question 19

Kevin exchanges an office building used in his business for another office building worth $200,000 plus $30,000 cash.The FMV of Kevin's old building is $280,000 (basis $150,000) and it is subject to a mortgage of $50,000.The mortgage is assumed by the other party.
a.What is the amount of gain realized by Kevin?
b.What is the amount of gain recognized by Kevin?
c.What is the basis of the new building to Kevin?

Accepted Answer

The answer of Kevin exchanges an office building used in...

Question 20

Summer exchanges an office building used in her business for another office building.Summer's office building has a FMV of $250,000 (basis of $180,000).The FMV of the new building is $300,000,and it is subject to a mortgage of $60,000,which is assumed by Summer.Summer also pays the other party $40,000 cash.
a.What is the amount of gain realized by Summer?
b.What is the amount of gain recognized by Summer?
c.What is the basis of the new building to Summer?

Accepted Answer

The answer of Summer exchanges an office building used in...

Quiz 12: Property Transactions: Nontaxable Exchanges