Question 1

Albert,age 57,leased a house for one year in Denver 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 25 months before his employer transferred him to Tucson.Expecting to be in Tucson for 18 to 24 months,he rented the Denver 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,Albert's employer offered him a permanent position in Tucson as branch manager.The tenant who had been occupying Albert's house in Denver purchased it at the end of the 24-month extended lease period.Is Albert eligible to elect exclusion treatment under § 121?

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Question 2

Sam sells land with an adjusted basis of $35,000 and a fair market value of $50,000 to Cynthia,his wife,for $50,000.Discuss how the tax consequences would differ if Sam and Cynthia had never been married.

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Question 3

Rose's manufacturing plant is destroyed by fire on the afternoon of November 1,2010.The adjusted basis is $800,000.The insurance company offers a settlement of $760,000.After protracted negotiations,Rose receives $810,000 on July 25,2011.Rose is a fiscal year taxpayer whose tax year ends on June 30th.What is the latest date that Rose can invest the proceeds in qualifying replacement property and elect to defer the gain under § 1033?

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Question 4

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

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Question 5

Under what circumstances may a partial § 121 exclusion be available even though the taxpayer has used the § 121 exclusion within the two-year period preceding the sale of the current residence?

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Question 6

Discuss the treatment of losses from involuntary conversions.

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Question 7

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

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Question 8

Discuss the treatment of realized gains from involuntary conversions.

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Question 9

Melissa,age 58,marries Arnold,age 50,on June 1,2010.Melissa decides to sell her principal residence on August 1,2010,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 2008 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?

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Question 10

Identify two tax planning techniques that can be used to avoid the wash sale disallowance of loss.

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Question 11

Louis owns a condominium in New Orleans which has been his principal residence for 12 years.He wants to be near Lake Ponchartrain since he enjoys water activities.Therefore,he sells the condominium.His original intent was to purchase a house in New Orleans near the lake.However,the cost of such properties far exceeded his sales proceeds.He was able to purchase a house on the lake in Covington,which is located across the causeway.He invested all of his sales proceeds in the Covington house.After two months of commuting over an hour to and from work each day,he decides to rent an efficiency apartment in New Orleans near his office.He spends the weekends and vacations at his home in Covington.

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Question 12

Why is it generally undesirable to pass property by death when its fair market value is less than basis?

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Question 13

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

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Question 14

Taxpayer acquired a personal residence ten years ago when he was 50 years old.During this period he has occupied the residence for only nine months (out of 12)each year due to winter vacations in Florida.Is taxpayer eligible for exclusion of gain under § 121?

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Question 15

Distinguish between a direct involuntary conversion and an indirect involuntary conversion.

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Question 16

Can related parties take advantage of the like-kind exchange provisions?

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Question 17

Taxpayer's principal residence is destroyed by a tornado.Taxpayer is single and his realized gain is $400,000.Is it possible for the taxpayer's recognized gain to be $0?

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Question 18

Under what circumstance is there recognition of some or all of the realized gain associated with the giving of boot by the taxpayer in a like-kind exchange?

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Question 19

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 20

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

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Quiz 13: Part 2--Property Transactions: Determination of Gain or Loss,basis Considerations,and Nontaxable Exchanges