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Exam 12: Property Transactions: Nontaxable Exchanges

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Question 31

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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.

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Question 32

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Kevin exchanges an office building used in his business for another office building worth $200,000 plus $30,000 cash. The FMV of Kevin's old building is $280,000 (basis $150,000)and it is subject to a mortgage of $50,000. The mortgage is assumed by the other party. a. What is the amount of gain realized by Kevin? b. What is the amount of gain recognized by Kevin? c. What is the basis of the new building to Kevin?

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a. Property received:
b. Gain recogniz...

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Question 33

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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?

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

The basis of non-like-kind property received is the basis in the hands of the transferor at the date of the exchange.

If a gain is realized on the involuntary conversion of property, the gain may be deferred if qualifying replacement property is acquired within a specified time period at a cost equal to or greater than the amount realized on the involuntary conversion.

When an involuntary conversion is due to the condemnation of real property held for productive use in a trade or business or for investment, the replacement period will end three years after the close of the first tax year in which any part of the gain is realized.

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

Where non-like-kind property other than cash is received as boot, the amount of the boot is the property's fair market value.

Which of the following statements in not correct regarding the compliance requirements of an involuntary conversion?

Whitney exchanges timberland held as an investment for undeveloped land with a $300,000 FMV. Whitney's basis for the timberland is $150,000. She also transfers her tractor with a $15,000 basis and a $10,000 FMV as part of the exchange. a. What is the amount, if any, of gain or loss recognized on the transaction? b. What is the basis of the undeveloped land?

In an involuntary conversion, the basis of replacement property is its cost reduced by the gain deferred.

The building used in Terry's business was condemned by the city of St. Louis. Terry received a condemnation award of $125,000. He paid $1,200 in lawyer's fees and $800 for an appraisal of the property. Terry's adjusted basis in the building was $60,000. Terry reinvests in similar property costing $110,000, and Terry makes the proper election regarding the property. What is the amount of Terry's recognized gain on the condemnation?

Which of the following statements with respect to a like-kind exchange is false?

Which of the following is not an unforeseen circumstance for purposes of obtaining a partial exclusion of a gain on the sale of a home?

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?

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

Mick owns a racehorse with a $500,000 basis used for breeding purposes. The racehorse is killed in an accident and Mick receives $750,000 from the insurance company. Mick purchases another racehorse for $400,000. a. What is the amount of Mick's realized gain? b. What is the amount of Mick's recognized gain?

Frank, a single person age 52, sold his home this year. He had lived in the house for 10 years. He signed a contract on March 4 to sell his home and closed the sale on May 3. Based on these facts, what is the amount of his recognized gain?

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