Question 1

Stephanie's building,which was used in her business,was destroyed in a fire.Stephanie's adjusted basis in the building was $175,000,and its FMV was $210,000.Stephanie filed an insurance claim and was reimbursed $200,000.In that same year,Stephanie invested $180,000 of the insurance proceeds in another business building.If the proper election is made,Stephanie will recognize gain of

Accepted Answer

C)
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Question 2

Bob owns a warehouse that is used in business while Rebecca owns land.Bob exchanges the warehouse for the land,which will be held for investment.The FMV of the warehouse is $440,000 (basis $240,000),but the warehouse is subject to a mortgage of $80,000,which is assumed by Rebecca.Bob receives $40,000 cash and the land,which has a FMV of $320,000.Bob realizes a gain (loss)on the exchange of

Accepted Answer

The answer of Bob owns a warehouse that is used...

Question 3

Gena exchanges land held as an investment with a $60,000 basis for other land with a $80,000 FMV and a motorcycle with a $10,000 FMV.The acquired land is to be held for investment and the motorcycle is for personal use.What is the amount of recognized gain?

Accepted Answer

When exchanging property, the recognized gain is equal to the lesser of the realized gain or the value of the boot received. In this case, the realized gain is $80,000 - $60,000 = $20,000. Gena received a motorcycle with a FMV of $10,000, which is considered boot since it is not like-kind property. Therefore, the recognized gain would be the lesser of $20,000 or $10,000, which is $10,000.

Question 4

Cassie owns a Rembrandt painting she acquired on June 1,2008 as an investment.She exchanges the painting on September 5,2013,for a Picasso sculpture and marketable securities to be held as an investment.On what date does the sculpture's holding period begin?

Accepted Answer

The answer of Cassie owns a Rembrandt painting she acquired...

Question 5

Pamela owns land for investment purposes.The land is worth $300,000 (basis of $260,000 to Pamela).Pamela exchanges the land,plus $20,000 cash,for a warehouse to be used in her business.The FMV of the warehouse is $400,000,but the warehouse is subject to a mortgage of $80,000,which is assumed by Pamela.Pamela must recognize a gain of

Accepted Answer

The answer of Pamela owns land for investment purposes.The land...

Question 6

Jason owns a warehouse that is used in business.The FMV of the warehouse is $200,000 (basis $120,000),and the warehouse is subject to a mortgage of $40,000.Jason exchanges the warehouse for land valued at $150,000.The other party also pays him $10,000 cash and assumes the mortgage on the warehouse.Jason's basis in the land received will be

Accepted Answer

The answer of Jason owns a warehouse that is used...

Question 7

Ron's building,which was used in his business,was destroyed in a fire.Ron's adjusted basis in the building was $210,000,and its FMV was $330,000.Ron filed an insurance claim and was reimbursed $300,000.In that same year,Ron invested $240,000 of the insurance proceeds in another business building.Ron will recognize gain of

Accepted Answer

The answer of Ron's building,which was used in his business,was...

Question 8

Stephanie's building,which was used in her business,was destroyed in a fire.Stephanie's adjusted basis in the building was $175,000,and its FMV was $210,000.Stephanie filed an insurance claim and was reimbursed $200,000.In that same year,Stephanie invested $180,000 of the insurance proceeds in another business building.Assuming the proper election is made to defer gain,Stephanie's basis in the new building will be

Accepted Answer

The answer of Stephanie's building,which was used in her business,was...

Question 9

In a nontaxable exchange,Henri traded in a truck having an adjusted basis of $8,500 and a FMV of $10,000,for a new truck having a FMV of $15,000.In addition,Henri paid cash of $5,000.What is Henri's basis in the new truck?

Accepted Answer

In a non-taxable exchange, the basis of the new property is equal to the adjusted basis of the old property, plus any additional cash paid. Therefore, Henri's basis in the new truck would be $8,500 (adjusted basis of the old truck) + $5,000 (cash paid) = $13,500.

Question 10

Emily owns land for investment purposes that has a FMV of $300,000 (basis of $260,000).She exchanges the land,plus $40,000 cash,for a warehouse to be used in her business.The warehouse is worth $420,000,but is subject to a mortgage of $80,000 which Emily will assume.The gain realized by Emily on the exchange is

Accepted Answer

A)The taxpayer receives a warehouse worth $420,000,but in exchange gives up land with an adjusted basis of $260,000 and $40,000 of cash and assumes an $80,000 liability,resulting in the $40,000 realized gain.

Question 11

Glen owns a building that is used in business.The building is worth $200,000,but is subject to a mortgage of $40,000.Glen's basis in the building is $120,000.Glen exchanges the building for investment land worth $150,000 plus $10,000 cash.In addition,the other party assumes the mortgage which will be held for investment.Glen must recognize a gain of

Accepted Answer

To calculate the gain on the exchange, we need to compare Glen's adjusted basis ($120,000) with the fair market value of what he received ($150,000 in land plus $10,000 cash). Since the other party assumed the mortgage, we can't simply subtract it from Glen's side of the exchange to reduce his gain.

So, Glen's total value received is $160,000 ($150,000 + $10,000), while his adjusted basis is $120,000. This means Glen has recognized a gain of $40,000 ($160,000 - $120,000).

Therefore, the answer is C) $50,000.

Question 12

Yael exchanges an office building worth $150,000 for investment land worth $175,000.He also provided stock worth $25,000.Yael's adjusted basis in the building and stock is $180,000 and $11,000,respectively.How much gain or loss will Yael recognize on the exchange?

Accepted Answer

To calculate the gain or loss recognized on the exchange, we need to compare the total value of both sides of the exchange. The investment land and stock provided have a total value of $200,000 ($175,000 + $25,000). Yael's adjusted basis in the building and stock is $191,000 ($180,000 + $11,000). Therefore, Yael will recognize a gain of $9,000 ($200,000 - $191,000), which is taxable. So, the correct answer is D.

Question 13

Bobbie exchanges business equipment (adjusted basis $160,000)for other business equipment that has a FMV of $140,000.Bobbie also receives $30,000 cash.Bobbie's basis in the new equipment is

Accepted Answer

B)This transaction qualifies as a like-kind exchange with boot received.The gain realized is $170,000 (FMV of new equipment plus $30,000 cash)- $160,000 adjusted basis of old equipment = $10,000.She must recognize gain to the extent of the lesser of the boot received or the realized gain so the full $10,000 realized gain is recognized.The basis of the new equipment is [$160,000 (old basis)- 30,000 (boot received)+ 10,000 (gain recognized)] = $140,000 or the FMV of property received less unrecognized gain of $0 = $140,000.

Question 14

All of the following are true except:

Accepted Answer

A nonsimultaneous exchange can qualify as a like-kind exchange if all other requirements are met.

Question 15

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

Accepted Answer

The statement "A loss is always recognized if the taxpayer transfers non-like-kind personal use property in an otherwise like-kind exchange" is not true. In fact, if non-like-kind personal use property is transferred in a like-kind exchange, any loss on that property is not recognized and any gain is recognized to the extent of the boot received.

Question 16

If there is a like-kind exchange of property between related parties,how long do they have to wait to dispose of the property received in order to avoid having to recognize any gain on the exchange?

Accepted Answer

When there is a like-kind exchange of property between related parties, if the party receiving the property disposes of it within two years of receiving it, they will have to recognize any gain on the exchange. Therefore, the correct choice is C) 2 years.

Question 17

Laurie owns land held for investment.The land's FMV is $150,000.Laurie's basis in the land is $130,000.Laurie exchanges the land,plus $20,000 of cash,for a warehouse owned by Trey.The warehouse is worth $210,000,but is subject to a mortgage of $40,000 which Laurie will assume.Trey's basis in the warehouse is $120,000.Laurie's basis in the warehouse received will be

Accepted Answer

In an exchange of property, the basis of the property received is the Fair Market Value (FMV) of the property given up plus any cash or liabilities assumed, minus any expenses incurred in the exchange.

In this case, Laurie gave up land with a FMV of $150,000 and a basis of $130,000, and $20,000 of cash. She received a warehouse with a FMV of $210,000 but subject to a mortgage of $40,000 that she assumed.

Therefore, Laurie's basis in the warehouse received is:

FMV of property received ($210,000) 
- Mortgage assumed ($40,000) 
- Cash paid ($20,000) 
+ Basis of property given up ($130,000)

= $280,000 - $40,000 - $20,000 + $130,000 = $350,000 - $60,000 = $290,000

However, the basis cannot be greater than the FMV of the property given up plus any cash or liabilities assumed, which is $150,000 + $20,000 + $40,000 = $210,000. Therefore, Laurie's basis in the warehouse received is limited to $210,000.

Since Trey's basis in the warehouse is $120,000, Laurie's basis in the warehouse received will be the higher of the FMV of the property received limited by the amount of the property given up plus any cash or liabilities assumed, and Trey's basis in the property given up.

Therefore, Laurie's basis in the warehouse received is $190,000 ($210,000 limited by the amount of the property given up plus any cash or liabilities assumed), which is higher than Trey's basis in the property given up.

Question 18

Kai owns an apartment building held for investment purposes.The apartment building is worth $500,000,although it is subject to a mortgage of $100,000.Kai's basis in the apartment building is $380,000.Kai exchanges the apartment building for an office building.The office building has an FMV of $350,000.Kai receives $50,000 cash in addition to receiving the office building,and the other party assumes the apartment building mortgage.What is Kai's recognized gain on this exchange?

Accepted Answer

To calculate Kai's recognized gain, we need to compare the FMV of the property given up ($500,000) to Kai's adjusted basis in the property ($380,000). The difference is $120,000, which represents Kai's potential gain on the exchange. However, Kai receives $50,000 cash in addition to the office building, which reduces the potential gain to $70,000. Since Kai is not receiving any other property or services in the exchange, this gain is recognized and taxable. Therefore, the answer is choice C, $120,000.

Question 19

Rolf exchanges an office building worth $150,000 for investment land worth $175,000.He also provided stock worth $25,000.Rolf's adjusted basis in the building and stock is $130,000 and $11,000,respectively.How much gain will Rolf recognize on the exchange?

Accepted Answer

To calculate the gain recognized on the exchange, we need to determine the total value received by Rolf in the exchange and then subtract his adjusted basis.

The total value received by Rolf is $175,000 (value of investment land) + $25,000 (value of stock) = $200,000.

Rolf's adjusted basis is $130,000 (building) + $11,000 (stock) = $141,000.

Therefore, the gain recognized is $200,000 - $141,000 = $59,000.

However, Rolf is using a like-kind exchange, which allows him to defer recognition of the gain, meaning he recognizes $0 gain at this time. The adjusted basis of the investment land and stock will be $141,000, which is the adjusted basis of the building and stock transferred.

Question 20

Rosa exchanges business equipment with a $60,000 adjusted basis for a like-kind piece of equipment with a $100,000 FMV and $20,000 of marketable securities.What is Rosa's basis for the new equipment?

Accepted Answer

A)This transaction qualifies as a like-kind exchange with boot received.$60,000 basis of property exchanged - $20,000 boot received + $20,000 gain recognized = $60,000

Quiz 24: Property Transactions: Nontaxable Exchanges