Question 1

In a like-kind exchange,both the property transferred and the property received must be held by the taxpayer either for productive use in a trade or business or for investment.

Accepted Answer

According to IRS rules for like-kind exchanges, both the property transferred and the property received must be held by the taxpayer for productive use in a trade or business or for investment purposes.

Question 2

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

False

Question 3

An investor in artwork holds a Picasso painting which has appreciated substantially since she purchased it.The art investor exchanges the Picasso for a Van Gogh painting of similar value.The transaction qualifies as a like-kind exchange and the gain will not be recognized.

Accepted Answer

Both the Picasso and the Van Gogh are held for investment purposes and are of like class so the transaction qualifies as a like-kind exchange.

Question 4

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

Accepted Answer

This is true according to the IRS rules for boot property received in a 1031 exchange. The holding period for the boot property starts on the day after the exchange, just like the holding period for the relinquished property being exchanged.

Question 5

An exchange of inventory for inventory of a like kind qualifies as a like-kind exchange.

Accepted Answer

An exchange of inventory or securities does not qualify as a like-kind exchange.

Question 6

The exchange of a personal-use automobile for stock in an automobile manufacturer held as an investment qualifies for like-kind treatment.

Accepted Answer

The exchange of personal-use property, such as an automobile, for investment property, such as stock, does not qualify for like-kind treatment under Section 1031 of the Internal Revenue Code. Like-kind exchanges only apply to property held for productive use in a trade or business or for investment purposes. Therefore, the exchange of a personal-use automobile for stock in an automobile manufacturer would not qualify for like-kind treatment.

Question 7

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 answer of The basis of non-like-kind property received is...

Question 8

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 properties are located in different countries, which means they are not like-kind properties. Like-kind properties must be located within the United States.

Question 9

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

Accepted Answer

Cash and non-like-kind property received in a nontaxable exchange are considered boot and can potentially trigger taxable gain.

Question 10

Real property exchanged for personal property qualifies as a like-kind exchange.

Accepted Answer

Real property can only be exchanged for other real property to qualify as a like-kind exchange. Personal property can only be exchanged for other personal property to qualify as a like-kind exchange.

Question 11

Which of the following statements with respect to a like-kind exchange is false?
A)Property of one class must be exchanged for property of the same class.
B)An exchange of inventory does not qualify as a like-kind exchange.
C)Personal property must be exchanged for personal property.
D)Sale of property and subsequent purchase of like-kind property will always qualify as a like-kind exchange.

Accepted Answer

The statement "Sale of property and subsequent purchase of like-kind property will always qualify as a like-kind exchange" is false. To qualify as a like-kind exchange under Section 1031, the exchange must be simultaneous or occur within 180 days. Simply selling property and using the proceeds to purchase like-kind property at a later date does not qualify as a like-kind exchange.

Question 12

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

Accepted Answer

Receipt of boot as part of a nontaxable exchange does not cause a realized loss to be recognized. Instead, the basis of the property received is adjusted by the amount of the boot received.

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

Question 14

The exchange of a partnership interest for an interest in another partnership qualifies as a like-kind exchange.

Accepted Answer

Partnership interests,along with inventory and marketable securities,are disqualified assets.

Question 15

If an exchange qualifies as a like-kind exchange,nonrecognition of gain or loss is elective.

Accepted Answer

The answer of If an exchange qualifies as a like-kind...

Question 16

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 received...

Question 17

All of the following qualify as a like-kind exchange except
A)an apartment building held for investment for farmland used in a trade or business.
B)a printer used in trade or business for a computer used in trade or business.
C)improved real estate held for investment for unimproved real estate held for investment.
D)an airplane used in trade or business for a general purpose truck used in trade or business.

Accepted Answer

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

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. Whenever non-like-kind property is received as boot, the fair market value of the property is considered as the amount of the boot.

Question 19

Realized gain or loss must be recognized unless a specific Code section provides for nonrecognition treatment.

Accepted Answer

This is a basic principle of tax law known as the realization rule. It means that when a taxpayer sells or exchanges property, they must generally recognize any gain or loss that results from the transaction. However, there are certain exceptions to this rule, such as when property is transferred as part of a like-kind exchange or when a taxpayer receives property as a gift.

Question 20

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 sale and purchase of like-kind property can qualify as a like-kind exchange under Section 1031 of the Internal Revenue Code if both transactions are interdependent, meaning they are part of a single, integrated transaction.

Quiz 24: Property Transactions: Nontaxable Exchanges