Deck 12: Non-Recognition Transactions

Question 1

Classification of a nonrecognition transaction as a continuation of an investment requires a qualified replacement asset.

Answer 1

True

Question 2

The holding period of an asset received in a like-kind exchange includes the holding period of the transferred asset.

Answer 2

True

Question 3

For related parties to qualify for a like-kind exchange, the property received must be held for six months.

Answer 3

False

Question 4

The recognition of a loss realized on an involuntary conversion is mandatory.

Question 5

In general, qualified replacement property for an involuntary conversion must be purchased within one year after the close of the tax year in which the involuntary conversion occurred.

Question 6

Gain deferral is fundamental to the nonrecognition transactions. In which of the following is gain deferral mandatory? I. Involuntary conversion of business real estate. II. Like-kind exchange of business real estate.

A) Only statement I is correct.
B) Only statement II is correct.
C) Both statements are correct.
D) Neither statement is correct.

Question 7

When two qualified assets are exchanged and their fair market values are not equal, additional nonqualifying property referred to as "boot" can be used to equalize the transaction without disqualifying the nonrecognition transaction.

Question 8

An involuntary conversion occurs whenever a loss but not a gain) is realized from a transaction that occurs against the taxpayer's will.

Question 9

The basis of replacement property in a nonrecognition transaction is the adjusted basis of the property received less any deferred gain.

Question 10

Ed and Elise got married during the year and they each sold their homes to buy a new house for them to live in. As long as they file a joint return they can each claim a $250,000 exclusion.

Question 11

Which of the following can be income deferral transactions? I. Sale of municipal bonds. II. Involuntary conversions of property.

A) Only statement I is correct.
B) Only statement II is correct.
C) Both statements are correct.
D) Neither statement is correct.

Question 12

Nancy purchased her houseboat six years ago for $35,000. She has lived in the houseboat since she purchased it. A friend has offered $62,000 for the houseboat. If she sells it, she will be able to exclude the gain.

Question 13

Taxpayers are allowed to structure transactions through third parties that qualify as exchanges if they meet certain time requirements for identifying properties and closing the transaction.

Question 14

A gain on a like-kind exchange is always recognized to the extent of any boot received.

Question 15

The deferral of a gain realized on an involuntary conversion is mandatory.

Question 16

A fire destroyed Josh's Scuba Shop. The business had an adjusted basis of $500,000 and a fair market value of $600,000. Josh received $550,000 from the insurance company and used the cash to go to Hawaii. I. Josh has a realized gain of $100,000. II. Josh has a recognized gain of $50,000.

A) Only statement I is correct.
B) Only statement II is correct.
C) Both statements are correct.
D) Neither statement is correct.

Question 17

Which of the following can be income deferral transactions? I. Exchanges of like-kind property. II. Involuntary conversions of property.

A) Only statement I is correct.
B) Only statement II is correct.
C) Both statements are correct.
D) Neither statement is correct.

Question 18

The mechanism for effecting a deferral in a nonrecognition transaction is an adjustment of the replacement asset's basis.

Question 19

Simon exchanged his Mustang for Michael's Econovan so that he could go hunting. The exchange does not qualify as a like-kind exchange since the assets are personal.

Question 20

A fire destroyed Jimmy's Teeshirt Shop. The business had an adjusted basis of $500,000 and a fair market value of $600,000 before the fire. Jimmy received $550,000 from the insurance company and opened a new Teeshirt Shop with the proceeds. I. Jimmy has a realized gain of $50,000. II. Jimmy has a recognized gain of $50,000.

A) Only statement I is correct.
B) Only statement II is correct.
C) Both statements are correct.
D) Neither statement is correct.

Question 21

Rationale for nonrecognition includes which of the following? I. A refinement of the realization concept, which postpones recognition of appreciation in value until the taxpayer disposes of a property, or its replacement. II. Under the Substance-over-form doctrine, new property acquired in a transaction is viewed as a continuation of the original investment. III. The taxpayer lacks wherewithal to pay the tax on a realized gain because the amount realized on the transaction is reinvested in the replacement asset.

A) Only II is correct.
B) Only I is correct.
C) II and III are correct.
D) I, II, and III are correct.
E) Only III is correct.

Question 22

Under the like-kind exchange rules, when like-kind property is traded for like-kind property, a loss on a trade-in is:

A) recognized and treated as a capital loss.
B) recognized and treated as an ordinary loss.
C) not recognized and increases the basis of the replacement property.
D) not recognized and decreases the basis of the replacement property.
E) none of the above.

Question 23

Which of the following qualifies as a like-kind exchange of property? I. Inventory for inventory. II. Office equipment for a delivery van.

A) Only statement I is correct.
B) Only statement II is correct.
C) Both statements are correct.
D) Neither statement is correct.

Question 24

For a transaction to qualify as a third-party exchange, I. The exchange must be completed within 1 year of the first exchange. II. The property exchanged must be identified within 45 days of the first exchange.

A) Only statement I is correct.
B) Only statement II is correct.
C) Both statements are correct.
D) Neither statement is correct.

Question 25

Which of the following qualifies as a like-kind exchange of property? I. Commercial retail building and its land for an office building and its land. II. Louisiana Oil, Inc. common stock for Louisiana Oil, Inc. corporate bonds.

A) Only statement I is correct.
B) Only statement II is correct.
C) Both statements are correct.
D) Neither statement is correct.

Question 26

Which of the tax concepts) allow for the deferral of gains on nonrecognition transactions? I. Capital Recovery Concept. II. Ability to Pay Concept.

A) Only statement I is correct.
B) Only statement II is correct.
C) Both statements are correct.
D) Neither statement is correct.

Question 27

Commonalties of nonrecognition transactions include that I. deferring a loss is mandatory on like-kind exchanges. II. deferring a loss is mandatory on involuntary conversions.

A) Only statement I is correct.
B) Only statement II is correct.
C) Both statements are correct.
D) Neither statement is correct.

Question 28

The general mechanism used to defer gains and losses from a transaction includes certain adjustments to the fair market value of the replacement property. These adjustments include I. adding boot received. II. subtracting deferred gains.

A) Only statement I is correct.
B) Only statement II is correct.
C) Both statements are correct.
D) Neither statement is correct.

Question 29

Which of the following exchanges of property are like-kind exchanges? I. Convenience store owner trades several cases of potato chips for a cash register. II. A completely rented apartment building traded for a parts supply warehouse to use in business.

A) Only statement I is correct.
B) Only statement II is correct.
C) Both statements are correct.
D) Neither statement is correct.

Question 30

Wendell owns 115 acres of land with a fair market value of $57,000. He purchased the land as an investment for $35,000 in 1993. Wendell trades the land for a 122-acre parcel adjacent to other property he owns. The 122 acres has a value of $57,000, and the exchange qualifies for like-kind deferral treatment. What is Wendell's recognized gain on the exchange?

A) $- 0 -
B) $22,000
C) $35,000
D) $57,000
E) $79,000

Question 31

Karen owns a commercial office building with a fair market value of $140,000. She purchased the building as an investment for $102,000 in 2003. She has claimed $18,000 in depreciation deductions. Karen trades the building for an apartment complex. The apartment complex has a value of $140,000, and the exchange qualifies for like-kind deferral treatment. What is Karen's basis in the apartment complex?

A) $- 0 -
B) $ 58,000
C) $ 84,000
D) $140,000
E) $198,000

Question 32

Which of the following qualifies as a like-kind exchange of property? I. Registered trademark for a copyright. II. A 2009 Chevy, business-use automobile for a 2010 Ford, business-use automobile

A) Only statement I is correct.
B) Only statement II is correct.
C) Both statements are correct.
D) Neither statement is correct.

Question 33

Which of the following exchanges of property are like-kind exchanges? I. Common stock of Intel traded for preferred stock of Intel. II. Principal residence traded for 20 acres of undeveloped investment land.

A) Only statement I is correct.
B) Only statement II is correct.
C) Both statements are correct.
D) Neither statement is correct.

Question 34

Fran owns a commercial office building with a fair market value of $850,000. She purchased the building as an investment for $815,000 in 2006. She has deducted $115,000 in depreciation. Fran trades the building for an apartment complex. The apartment complex has a value of $850,000, and the exchange qualifies for like-kind deferral treatment. What is Fran's recognized gain on the exchange?

A) $- 0 -
B) $35,000
C) $115,000
D) $150,000
E) $850,000

Question 35

Willie owns 115 acres of land with a fair market value of $57,000. He purchased the land as an investment for $35,000 in 1993. Willie trades the land for a 122-acre parcel adjacent to other property he owns. The 122 acres has a value of $57,000, and the exchange qualifies for like-kind deferral treatment. What is Willie's basis in the new parcel of land?

A) $- 0 -
B) $17,000
C) $35,000
D) $57,000
E) $74,000

Question 36

Randy owns 115 acres of land with a fair market value of $57,000. He purchased the land as an investment for $35,000 in 1993. Randy trades the land for a 122-acre parcel adjacent to other property he owns. The 122 acres has a value of $57,000, and the exchange qualifies for like-kind deferral treatment. What is Randy's realized gain on the exchange?

A) $- 0 -
B) $22,000
C) $35,000
D) $57,000
E) $79,000

Question 37

Commonalties of nonrecognition transactions include that I. gains on all transactions must be recognized when the taxpayer has the wherewithal-to- pay. II. tax attributes carryover from the original asset to the replacement asset.

A) Only statement I is correct.
B) Only statement II is correct.
C) Both statements are correct.
D) Neither statement is correct.

Question 38

No taxable gain or loss is recognized on a like-kind exchange of an investment asset for a similar asset that will be held for investment if both assets consist of

A) Partnership interests.
B) Convertible debentures.
C) Mortgage notes
D) Rental real estate located in different states.
E) Common stock of companies in the same industry.

Question 39

The general mechanism used to defer gains and losses from a transaction includes certain adjustments to the basis of the replacement property. These adjustments include I. subtracting deferred losses. II. adding deferred gains.

A) Only statement I is correct.
B) Only statement II is correct.
C) Both statements are correct.
D) Neither statement is correct.

Question 40

Rationale for nonrecognition of property transactions exists because of which concepts) of taxation? I. Wherewithal-to-Pay Concept. II. Constructive receipt Doctrine.

A) Only statement I is correct.
B) Only statement II is correct.
C) Both statements are correct.
D) Neither statement is correct.

Question 41

Rebecca trades in her four-wheel drive truck for a new one. Rebecca's truck cost $20,000 and has an $8,000 basis on the date of the trade-in. The price of the new truck is $27,000 and the dealer gives Rebecca a $10,000 trade in allowance on her old truck. She uses the trucks in her business. What is Rebecca's basis in the new truck?

A) $8,000
B) $18,000
C) $25,000
D) $27,000
E) $29,000

Question 42

Grant exchanges an old pizza oven from his business for a new oven. In addition to the old oven, which had a basis of $10,000, Grant pays $4,000 cash and takes out a loan on the new oven for $6,000. The new oven is valued at $22,000. What is Grant's basis in the new oven?

A) $12,000
B) $16,000
C) $20,000
D) $22,000
E) $32,000

Question 43

Robert trades an office building located in Tennessee to John for an apartment complex located in New Jersey. Details of the two properties:

Question 44

Matthew exchanges an investment apartment building for a parcel of land. The apartment building has a fair market value of $80,000 and an adjusted basis of $95,000. The land's value is $60,000. Matthew receives $20,000 cash in the exchange. What is Matthew's recognized gain or loss) on the exchange and his basis in the land? Gain Loss) Recognized Basis

Question 45

Rosilyn trades her old business-use car with an adjusted basis of $13,000 and an outstanding loan liability balance of $2,000 for a new business-use car valued at $9,000 plus $3,000 cash from Bob's Auto Sales and Loan Company. Bob assumes Rosilyn's loan balance. How much boot does Rosilyn receive in the transaction?

A) $- 0 -
B) $1,000
C) $2,000
D) $3,000
E) $5,000

Question 46

Belinda exchanges investment real estate with Russell. Belinda's adjusted basis in her two-year old property is $280,000. The property is encumbered by a mortgage of $100,000 and has a fair market value of $320,000 when exchanged. Russell assumes that debt. Russell paid $80,000 cash for his property in 1999 and it is appraised at $150,000 on the day of the exchange. Russell pays Belinda enough in cash to balance the exchange. What is Belinda's basis in the new land?

A) $20,000
B) $150,000
C) $280,000
D) $320,000

Question 47

Rosilyn trades her old business-use luxury car with an adjusted basis of $13,000 and an outstanding loan liability balance of $2,000 for a new business-use economy car valued at $9,000 plus $3,000 cash from Bob's Auto Sales and Loan Company. Bob assumes Rosilyn's loan balance. What is Rosilyn's amount realized on the transaction?

A) $3,000
B) $9,000
C) $12,000
D) $13,000
E) $14,000

Question 48

Norman exchanges a machine he uses in his pool construction business for a used machine worth $6,000 to use in the same business. He purchased the machine 3 years ago for $22,000 and had taken depreciation of $9,000 on the machine. In the exchange, Norman also receives $3,000 of cash. As a result of the exchange, I. Norman realizes a loss of $4,000 on the exchange. II. Norman's basis in the acquired machine is $13,000.

A) Only statement I is correct.
B) Only statement II is correct.
C) Both statements are correct.
D) Neither statement is correct.

Question 49

Rosilyn trades her old business-use car with an adjusted basis of $13,000 and an outstanding loan liability balance of $2,000 for a new business-use car valued at $9,000 plus $3,000 cash from Bob's Auto Sales and Loan Company. Bob assumes Rosilyn's loan balance. What is Rosilyn's basis in her new car?

A) $- 0 -
B) $9,000
C) $11,000
D) $12,000
E) $14,000

Question 50

Lindsey exchanges investment real estate parcels with Donna. Lindsay's adjusted basis in the property is $400,000, and it is encumbered by a mortgage liability of $200,000. Donna assumes the mortgage. Donna's property is appraised at $1,000,000 and is subject to a $100,000 liability. Lindsey assumes the liability. If no cash is exchanged, what is Lindsey's basis in the new real estate?

A) $- 0 -
B) $100,000
C) $200,000
D) $400,000
E) $600,000

Question 51

Roscoe receives real estate appraised at $200,000 and cash of $10,000 from Cathy in exchange for Roscoe's investment realty with a basis of $170,000. What is his basis in the new real estate?

A) $160,000
B) $170,000
C) $180,000
D) $200,000
E) $210,000

Question 52

Norman exchanges a machine he uses in his pool construction business for a used machine worth $6,000 to use in the same business. He purchased the machine 3 years ago for $22,000 and has taken depreciation of $9,000 on the machine. In the exchange, Norman also receives $3,000 of cash. As a result of the exchange, I. Norman's basis in the acquired machine is $10,000. II. Norman recognizes a loss of $3,000 on the exchange.

A) Only statement I is correct.
B) Only statement II is correct.
C) Both statements are correct.
D) Neither statement is correct.

Question 53

Roscoe receives real estate appraised at $200,000 and cash of $10,000 from Cathy in exchange for Roscoe's investment realty with a basis of $170,000. Roscoe plans to hold the new realty for investment. What is the amount realized for the property given up by Roscoe?

A) $160,000
B) $170,000
C) $190,000
D) $200,000
E) $210,000

Question 54

Roscoe receives real estate appraised at $200,000 and cash of $10,000 from Cathy in exchange for his investment realty with a basis of $170,000. Roscoe plans to hold the new realty for investment. What is his recognized gain?

A) $- 0 -
B) $10,000
C) $20,000
D) $30,000
E) $40,000

Question 55

Grant exchanges an old pizza oven from his business for a new oven. In addition to the old oven, which has a basis of $10,000, Grant pays $4,000 cash and takes out a loan on the new oven for $6,000. The new oven is valued at $22,000. What is Grant's recognized gain or loss due on this transaction?

A) $- 0 -
B) $2,000
C) $12,000
D) $16,000
E) $22,000

Question 56

Justin trades an office building located in Michigan to John for an apartment complex located in North Carolina. Details of the two properties: In addition, John pays Justin $3,000,000 cash as part of this transaction. What is the gain loss) recognized by John in this transaction and what is his basis in the Michigan property?

Question 57

Cindy exchanges investment real estate with Russell. Cindy purchased her realty two years ago for $280,000, and it is encumbered by a mortgage of $100,000 and has a fair market value of $320,000 when exchanged. Russell paid $80,000 cash for his property in 1999 and it is appraised at $150,000 on the day of the exchange. Russell assumes the debt on his new land and pays Cindy enough in cash to balance the exchange. What is Cindy's recognized gain loss) on the exchange?

A) $-0-
B) $40,000
C) $100,000
D) $170,000

Question 58

Lindsey exchanges investment real estate parcels with Donna. Her adjusted basis in the property is $400,000, and it is encumbered by a mortgage liability of $200,000. Donna assumes the mortgage. Donna's property is appraised at $1,000,000 and is subject to a $100,000 liability. Lindsey assumes the liability. If no cash is exchanged, what is the amount of gain recognized by Lindsey?

A) $- 0 -
B) $100,000
C) $200,000
D) $500,000
E) $900,000

Question 59

Rosilyn trades her old business-use car with an adjusted basis of $13,000 and an outstanding loan liability balance of $2,000 for a new business-use car valued at $9,000 plus $3,000 cash from Bob's Auto Sales and Loan Company. Bob assumes Rosilyn's loan balance. What is Rosilyn's recognized gain on the transaction?

A) $- 0 -
B) $1,000
C) $2,000
D) $3,000
E) $5,000

Question 60

Rosilyn trades her old business-use car with an adjusted basis of $13,000 and an outstanding loan liability balance of $2,000 for a new business-use car valued at $9,000 plus $3,000 cash from Bob's Auto Sales and Loan Company. Bob assumes Rosilyn's loan balance. What is Rosilyn's realized gain on the transaction?

A) $- 0 -
B) $1,000
C) $2,000
D) $3,000
E) $5,000

Question 61

Natural Power Corporation owns a warehouse with an adjusted basis of $195,000 and an appraised fair market value of $185,000. The city of Springfield condemns the property for a new airport. The condemnation award is $185,000. Natural Power invests the $185,000 in a new warehouse on the other side of the city. What is the gain or loss that Natural Power Corporation must recognize due to the transactions?

A) No gain or loss
B) $10,000 gain
C) $10,000 loss
D) $185,000 gain

Question 62

Which of the following is/are correct concerning a principal residence? I. The maximum amount of gain a single taxpayer can exclude on the sale of a principal residence is $500,000. II. To qualify for a $250,000 exclusion, a single taxpayer must have owned and used the property as a principal residence for at least 2 of the previous 5 years.

A) Only statement I is correct.
B) Only statement II is correct.
C) Both statements are correct.
D) Neither statement is correct.

Question 63

Which of the following is/are correct regarding the sale of a principal residence? I. A taxpayer who is single and fails to meet the ownership or use test due to change in employment is entitled to a pro rata share of the $250,000 exclusion. II. A single taxpayer can exclude up to $250,000 of the gain on the sale of a vacation home.

A) Only statement I is correct.
B) Only statement II is correct.
C) Both statements are correct.
D) Neither statement is correct.

Question 64

Which of the following qualify as replacement property under the involuntary conversion rules? I. Smooth Yogurt Company's warehouse for storing its yogurt curds is condemned by the port authority. The warehouse will be replaced with a new office building in a neighboring community. II. Smooth Yogurt Company's other warehouse, which was fully leased to another company, is destroyed by a tornado. The warehouse will be replaced with a rental office building adjacent to the company's new office building and will be leased to various tenants.

A) Only statement I is correct.
B) Only statement II is correct.
C) Both statements are correct.
D) Neither statement is correct.

Question 65

Violet exchanges investment real estate with Russell. Violet's adjusted basis in her two-year old property is $280,000. The property is encumbered by a mortgage of $100,000 and has a fair market value of $320,000 when exchanged. Russell assumes that debt. Russell paid $80,000 cash for his property in 1999 and it is appraised at $150,000 on the day of the exchange. Russell pays Violet enough in cash to balance the exchange. What is Russell's recognized gain loss) on the exchange?

A) $-0-
B) $70,000
C) $80,000
D) $150,000

Question 66

Daisy's warehouse is destroyed by a tornado. The warehouse has an adjusted basis of $130,000 when destroyed. Daisy receives an insurance reimbursement check for $150,000 and immediately reinvests $120,000 of the proceeds in a new warehouse. What are Daisy's recognized gain or loss) and her basis in the replacement warehouse?

Question 67

If related parties complete a qualified like-kind exchange, how long must the parties wait before disposing of the property exchanged to insure that any realized gain on the transfer is not recognized?

A) No waiting.
B) 30 days.
C) 6 months.
D) 1 year.
E) 2 years.

Question 68

A flood destroys Owen's building that cost $100,000 in 2007, which has an adjusted basis of $80,000. Owen's insurance company reimburses him $125,000 for his loss. Owen promptly reconstructs the building for $115,000. What is the minimum amount of gain that Owen must recognize and his basis in the new building?

Question 69

Which of the following is/are correct regarding the sale of a principal residence? I. A single taxpayer can only use the $250,000 exclusion once every 3 years. II. Married taxpayers who both meet the ownership and use tests and file jointly can each exclude $250,000 of gain $500,000 total) on the sale of their principal residence.

A) Only statement I is correct.
B) Only statement II is correct.
C) Both statements are correct.
D) Neither statement is correct.

Question 70

Which of the following is/are correct concerning a principal residence? I. A principal residence can be a house, condominium, mobile home, or houseboat. II. A taxpayer can have more than one principal residence at a time.

A) Only statement I is correct.
B) Only statement II is correct.
C) Both statements are correct.
D) Neither statement is correct.

Question 71

Norm acquired office equipment for his business at a cost of $10,000. After two years of use, Norm exchanges the equipment for different equipment with a fair market value of $7,000. MACRS depreciation on the original equipment was $4,753 The exchange qualifies as a like-kind exchange. Immediately after the exchange Norm sells the new equipment for $7,000 cash. What is the amount and character of the gain recognized?

A) No gain or loss.
B) $1,753 Section 1231 gain.
C) $1,753 Section 1245 ordinary income.
D) $4,753 Section 1231 gain.
E) $4,753 section 1245 ordinary income, and $3,000 Section 1231 loss.

Question 72

Sarah exchanges investment real estate with Russell. Sarah's adjusted basis in her two-year old property is $280,000. The property is encumbered by a mortgage of $100,000 and has a fair market value of $320,000 when exchanged. Russell assumes that debt. Russell paid $80,000 cash for his property in 1999 and it is appraised at $150,000 on the day of the exchange. Russell pays Sarah enough in cash to balance the exchange. What is Russell's basis in the new land?

A) $80,000
B) $180,000
C) $250,000
D) $320,000
E) None of the above

Question 73

Nancy acquired office equipment for her business in 2010 at a cost of $15,000. During the current year, she exchanges the equipment for different equipment with a fair market value of $9,000. MACRS depreciation on the original equipment was $9,828. The exchange qualifies as a like-kind exchange. Immediately after the exchange Nancy sells the new equipment for $9,000 cash. What is the amount and character of the gain recognized?

A) No gain or loss.
B) $3,828 Section 1231 gain.
C) $3,828 Section 1245 ordinary income.
D) $6,000 Section 1245 ordinary income
E) $9,828 section 1245 ordinary income and $6,000 Section 1231 loss.

Question 74

Which of the following qualify as replacement property under the involuntary conversion rules? I. Mayfield Ice Cream Company's production plant is destroyed by a hurricane. The insurance proceeds are used to replace the plant with a refrigerated storage container. II. Mayfield Ice Cream Company's production plant is destroyed by a fire. They sign a five year lease for a replacement production facility, and the insurance proceeds are then used to buy an office building

A) Only statement I is correct.
B) Only statement II is correct.
C) Both statements are correct.
D) Neither statement is correct.

Question 75

Charlotte's apartment building that has an adjusted basis of $200,000 is destroyed by fire. Early the following year, Charlotte receives a $425,000 insurance check and reinvests $400,000 of the proceeds in an apartment building. What is the basis in the new building?

A) $- 0 -
B) $425,000
C) $400,000
D) $200,000
E) $175,000

Question 76

Carrie owns a business building with an adjusted basis of $95,000 and an appraised fair market value of $98,000. The city of Millerville condemns the property for a new highway. The condemnation award is $98,000. Carrie invests $90,000 of the proceeds into a new building on the other side of the city. What is the gain or loss that Carrie must recognize due to the transactions?

A) No gain or loss
B) $3,000 gain
C) $3,000 loss
D) $8,000 gain
E) $5,000 loss

Question 77

Which of the following statements is/are correct? I. The carryover-holding period only applies if the property exchanged is personal-use property. II. The holding period of like-kind property received includes the holding period of the property exchanged.

A) Only statement I is correct.
B) Only statement II is correct.
C) Both statements are correct.
D) Neither statement is correct.

Question 78

The earliest date that condemned property can be replaced and still qualify for involuntary conversion nonrecognition) treatment is

A) The date of the actual condemnation.
B) The date of the threat of condemnation.
C) Two years before the actual condemnation.
D) Two years before the threat of condemnation.
E) Three years after the date of the condemnation.

Question 79

Which of the following is/are correct regarding involuntary conversions? I. Gains may be deferred if the property involuntarily converted is replaced with property that is similar to or related in service or use to the converted property. II. Deferral of gains is elective only if direct conversion is made into similar property.

A) Only statement I is correct.
B) Only statement II is correct.
C) Both statements are correct.
D) Neither statement is correct.

Question 80

Which of the following is/are correct regarding the deferral of gain attributable to the involuntary conversion of personal property personalty)? I. Gain deferral is mandatory. II. Replacement property must be acquired within one year of the close of the tax year in which gain is realized from an involuntary property damage conversion.

A) Only statement I is correct.
B) Only statement II is correct.
C) Both statements are correct.
D) Neither statement is correct.