Question 1

Risa exchanges an office building with a $600,000 adjusted basis for an apartment building with a $1,000,000 FMV and $200,000 of marketable securities. What is Risa's basis for the apartment building?

Accepted Answer

The answer of Risa exchanges an office building with a...

Question 2

Kuda owns a parcel of land she acquired on June 1, 2012, as an investment. She exchanges the land on July 5, 2018, 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

The answer of Kuda owns a parcel of land she...

Question 3

Risa exchanges an office building with a $600,000 adjusted basis for an apartment building with a $1,000,000 FMV and $200,000 of marketable securities. The other party indicates he had paid $175,000 for the securities a year earlier. What is Risa's basis for the securities?

Accepted Answer

Risa's basis for the securities is their fair market value at the time of the exchange, which is $200,000.

Question 4

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

In a like-kind exchange between related parties, the parties must hold the exchanged property for at least 2 years to avoid recognizing any gain on the exchange. This rule is to prevent tax avoidance through quick resale.

Question 5

Kuda owns a parcel of land she acquired on June 1, 2012, as an investment. She exchanges the land on July 5, 2018, 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

The answer of Kuda owns a parcel of land she...

Question 6

Yael exchanges an office building worth $150,000 for investment land worth $175,000. Yael also transferred stock worth $25,000 to the other party. 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

Yael's total adjusted basis is $191,000 ($180,000 for the building + $11,000 for the stock). The total value received is $175,000 for the land. The recognized gain is the difference between the value received and the adjusted basis: $175,000 - $191,000 = -$16,000. However, since the transaction involves a like-kind exchange, Yael recognizes a gain of $14,000, which is the value of the stock transferred ($25,000) minus its adjusted basis ($11,000).

Question 7

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

The answer of Glen owns a building that is used...

Question 8

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...

Question 9

All of the following are true except

Accepted Answer

A nonsimultaneous exchange can qualify as a like-kind exchange if it meets certain requirements, such as the identification and exchange periods specified by the IRS.

Question 10

Henri likes to invest in land. In a nontaxable exchange, Henri exchanges land having an adjusted basis of $8,500 and a FMV of $10,000, for a another parcel of land having a FMV of $15,000. In addition, Henri paid cash of $5,000. What is Henri's basis in the new land?

Accepted Answer

Henri's basis in the new land is the adjusted basis of the old land ($8,500) plus the cash paid ($5,000), totaling $13,500.

Question 11

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

Accepted Answer

The answer of Bobbie exchanges farmland (adjusted basis $160,000) for...

Question 12

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 13

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

The answer of Emily owns land for investment purposes that...

Question 14

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

The recognized gain is the lesser of the realized gain or the boot received. The realized gain is $30,000 ($90,000 total FMV received - $60,000 basis). The boot received is $10,000 (FMV of the motorcycle). Therefore, the recognized gain is $10,000.

Question 15

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

Accepted Answer

In a like-kind exchange, losses are not recognized even if non-like-kind personal-use property is transferred.

Question 16

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

Jason's basis in the land is calculated as his original basis in the warehouse ($120,000) minus the mortgage assumed by the other party ($40,000) plus the cash received ($10,000), resulting in a basis of $120,000.

Question 17

Kole owns a warehouse used in his business which has an adjusted basis of $240,000 and is subject to a mortgage with an $80,000 principal balance. Kole exchanges the warehouse for land worth $320,000. In addition, he receives cash of $40,000. What is Kole's realized gain?

Accepted Answer

Kole's realized gain is calculated as the fair market value of the land received ($320,000) plus the cash received ($40,000) minus the adjusted basis of the warehouse ($240,000). Therefore, the realized gain is $320,000 + $40,000 - $240,000 = $120,000. However, the mortgage relief of $80,000 is also considered as part of the amount realized, making the total realized gain $200,000.

Question 18

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

The answer of Laurie owns land held for investment. The...

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

Rolf's total basis in the exchanged properties is $141,000 ($130,000 for the building + $11,000 for the stock). The total value of the properties received is $175,000. The gain is the difference between the value received and the basis, which is $34,000 ($175,000 - $141,000). However, since the exchange involves like-kind property (the building for the land), the gain recognized is limited to the value of the non-like-kind property (the stock), which is $25,000. Therefore, the recognized gain is $14,000 ($25,000 - $11,000 basis of the stock).

Question 20

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

The answer of Kai owns an apartment building held for...

Quiz 16: Tax Deductions and Travel Expenses for Employees and Self-Employed Individuals