Question 1

Fran was transferred from Phoenix to Atlanta. She sold her Phoenix residence adjusted basis of $250,000) for a realized loss of $50,000 and purchased a new residence in Atlanta for $375,000. Fran had owned and lived in the Phoenix residence for 6 years. What is Fran's recognized gain or loss on the sale of the Phoenix residence and her basis for the residence in Atlanta?
A) $0 and $375,000.
B) $0 and $425,000.
C) $50,000) and $325,000.
D) $50,000) and $375,000.
E) None of the above.

Accepted Answer

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Question 2

Edith's manufacturing plant is destroyed by fire on the afternoon of November 3, 2018. The adjusted basis is
$800,000. The insurance company offers a settlement of $700,000. After protracted negotiations, Edith receives
$825,000 on June 9, 2019. Edith is a fiscal year taxpayer whose tax year ends on June 30th. What is the latest date that Edith can invest the proceeds in qualifying replacement property and elect to defer the gain under § 1033?

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Question 3

What requirements must be satisfied to receive nontaxable exchange treatment under § 1031?

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Question 4

Discuss the relationship between the postponement of realized gain under § 1031 like-kind exchanges) and the adjusted basis and holding period for the replacement property.

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Question 5

What effect do the assumption of liabilities have on a § 1031 like-kind exchange?

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Question 6

Byron, who lived in New Hampshire, acquired a personal residence ten years ago when he was 52 years old. During this period he has occupied the residence for only eight months out of 12) each year due to winter vacations in Florida. Is Byron eligible for exclusion of gain under § 121?

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Question 7

To be eligible to elect postponement of gain treatment for an involuntary conversion, what are the three tests for qualifying replacement property?

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Question 8

How does the replacement time period differ for the condemnation of real property used in a trade or business or held for investment when compared with that for other involuntary conversions?

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Question 9

Discuss the relationship between realized gain and boot received in a § 1031 like-kind exchange.

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Question 10

What requirements must be satisfied for a delayed swap to qualify for § 1031 like-kind exchange treatment?

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Question 11

Evelyn, a calendar year taxpayer, lists her principal residence with a realtor on February 7, 2018, enters into a contract to sell on July 12, 2018, and sells i.e., the closing date) the residence on August 1, 2018. The realized gain on the sale is $225,000. Which date is the appropriate ending date in determining if the residence has been owned and used by the Evelyn as the principal residence for at least two years during the prior five-year period?
A) February 7, 2018.
B) July 12, 2018.
C) August 1, 2018.
D) December 31, 2018.
E) None of the above.

Accepted Answer

The appropriate ending date for determining if the residence has been owned and used by Evelyn as the principal residence for at least two years during the prior five-year period is the date of sale or closing, which is August 1, 2018. This is because the two-year period is measured up to the date of sale, and August 1, 2018, is the date of sale.

Question 12

Melissa, age 58, marries Arnold, age 50, on June 1, 2018. Melissa decides to sell her principal residence on August 1, 2018, which she has owned and occupied for the past 30 years. Arnold has never owned a house. However, while he was married to Kelly who died 6 months prior to his marriage to Melissa, Kelly used the § 121 election on the sale of her residence in January 2016 to reduce her realized gain from $123,000 to $0. Kelly used the sales proceeds to pay off Arnold's gambling debts. Can Melissa elect the § 121 exclusion on the sale of her residence? What is the maximum § 121 exclusion available to Melissa and Arnold if they file a joint return?

Accepted Answer

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Question 13

Carl sells his principal residence, which has an adjusted basis of $150,000 for $200,000. He incurs selling expenses of $20,000 and legal fees of $2,000. He had purchased another residence one month prior to the sale for $380,000. What is the recognized gain or loss and the basis of the replacement residence if the taxpayer elects to forgo the § 121 exclusion exclusion of gain on sale of principal residence)?
A) $0 and $380,000.
B) $0 and $408,000.
C) $28,000 and $352,000.
D) $28,000 and $380,000.
E) None of the above.

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Question 14

Evelyn's office building is destroyed by fire on July 12, 2018. The adjusted basis is $315,000. She receives insurance proceeds of $350,000 on August 31, 2018. Calculate the amount that Evelyn must reinvest in qualifying property in order that her recognized gain be $20,000. Assume she elects § 1033 nonrecognition of gain from an involuntary conversion) postponement treatment.

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Question 15

Discuss the logic for mandatory deferral of realized gain or loss for a § 1031 like-kind exchange.

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Question 16

Edward, age 52, leased a house for one year in Memphis with an option to buy as his personal residence. At the end of the lease, he purchased the house. He lived there for an additional 26 months before his employer transferred him to Tucson. Expecting to be in Tucson for 18 to 24 months, he rented the Memphis house for 18 months with an option to extend on a month to month basis for an additional 6 months. At the end of the 18-month period, Edward's employer offered him a permanent position in Tucson as branch manager. The tenant who had been occupying Edward's house in Memphis purchased it at the end of the 24-month extended lease period. Is Edward eligible to elect exclusion treatment under § 121?

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Question 17

What kinds of property do not qualify under the like-kind provisions?

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Question 18

If the taxpayer qualifies under § 1033 nonrecognition of gain from an involuntary conversion) and the amount reinvested in replacement property exceeds the amount realized, the basis of the replacement property is:
A) The cost of the replacement property.
B) The fair market value of the involuntarily converted property minus the postponed gain.
C) The cost of the replacement property minus the postponed gain.
D) The amount realized.
E) None of the above.

Accepted Answer

When a taxpayer qualifies under § 1033 nonrecognition of gain from an involuntary conversion and the amount reinvested in the replacement property exceeds the amount realized, the basis of the replacement property is equal to the cost of the replacement property minus the postponed gain. This is because the postponed gain is recognized to the extent that the amount realized from the involuntary conversion exceeds the cost of the replacement property.

Question 19

Discuss the treatment of realized gains from involuntary conversions.

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Question 20

During 2018, Howard and Mabel, a married couple, decided to sell their residence. The residence has a basis of $162,000 and has been owned and occupied by them for 11 years. The house was sold in May for $395,000 with broker's commissions and other selling expenses being $24,000. They purchased a new residence in June for
$400,000. What is the adjusted basis of the new residence?
A) $0
B) $141,000
C) $162,000
D) $191,000
E) None of the above

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Quiz 15: Property Transactions: Nontaxable Exchanges