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Exam 13: Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges

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Question 61

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Lily exchanges a building she uses in her rental business for a building owned by Kendall. She will use the building in her rental business. The adjusted basis of Lily's building is $120,000 and the fair market value is $170,000. Which of the following statements is correct?

A) Lily's recognized gain is $50,000 and her basis for the building received is $120,000.
B) Lily's recognized gain is $50,000 and her basis for the building received is $170,000.
C) Lily's recognized gain is $0 and her basis for the building received is $120,000.
D) Lily's recognized gain is $0 and her basis for the building received is $170,000.

E) A) and B)
F) B) and C)

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Question 62

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Marsha transfers her personal use automobile to her business (a sole proprietorship). The car's adjusted basis is $30,000 and the fair market value is $16,000. No cost recovery had been deducted by Marsha, since she held the car for personal use. Determine the adjusted basis of the car to Marsha's sole proprietorship including the basis for cost recovery.

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Question 63

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Jacob owns land with an adjusted basis of $140,000 and a fair market value of $115,000. Determine the amount of realized and recognized gain or loss to the seller and the adjusted basis for the buyer for each of the following. a. Jacob sells the land for $115,000 to a corporation in which he owns 60% of the stock. b. Jacob sells the land for $115,000 to a partnership in which he has a capital and profits interest of 60%.

Jamie is terminally ill and does not expect to live much longer. Pondering the consequences of her estate, she decides how to allocate her property to her nephews. She makes a gift of depreciated property (i.e., adjusted basis exceeds fair market value) to Will, a gift of appreciated property (i.e., fair market value exceeds adjusted basis) to Jim, and leaves appreciated property to Sam in her will. Each of the properties has the same fair market value. From an income tax perspective, which nephew is her favorite?

Explain how the sale of investment property at a loss to a brother is treated differently from a sale to a nephew.

Maud exchanges a rental house at the beach with an adjusted basis of $225,000 and a fair market value of $200,000 for a rental house at the mountains with a fair market value of $180,000 and cash of $20,000. What is the recognized gain or loss?

Jake exchanges land used in his business for a different parcel of land to be used in his business. His adjusted basis fo $325,000 and the fair market value is $310,000. The fair market value of the new parcel of land is $300,000. In additi receives cash of $10,000. Calculate Jake's realized and recognized gain or loss and his adjusted basis for the assets r

The terms "realized gain" and "recognized gain" can be used interchangeably; they mean the same thing.

Sandra's automobile, which is used exclusively in her trade or business, was damaged in an accident. The adjusted basis prior to the accident was $11,000. The fair market value before the accident was $10,000 and the fair market value after the accident is $6,000. Insurance proceeds of $3,200 are received. What is Sandra's adjusted basis for the automobile after the casualty?

A taxpayer who sells his or her principal residence at a realized loss can elect to recognize the loss even if a qualified residence is acquired during the statutory time period.

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

Lump-sum purchases of land and a building are allocated on the basis of the relative fair market values of the individual assets acquired.

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?

If a taxpayer purchases a business and the price exceeds the fair market value of the listed assets, how is the excess allocated among the purchased assets?

A realized loss whose recognition is postponed results in the temporary recovery of more than the taxpayer's cost or other basis.

If insurance proceeds are received for property used in a trade or business, a casualty transaction can result in recognized gain but cannot result in a recognized loss.

Kendra owns a home in Atlanta. Her company transfers her to Chicago on January 2, 2019, and she sells the Atlanta house in early February 2019. She purchases a residence in Chicago on February 3, 2019. On December 15, 2019, Kendra's company transfers her to Los Angeles. In January 2020, she sells the Chicago residence and purchases a residence in Los Angeles. Because multiple sales have occurred within a two-year period, § 121 treatment does not apply to the sale of the second home.

Tobin inherited 100 acres of land on the death of his father in 2019. A Federal estate tax return was filed and the land was valued at $300,000 (its fair market value at the date of the death) . The father had originally acquired the land in 1976 for $19,000 and prior to his death had made permanent improvements of $6,000. What is Tobin's basis in the land?

Kelly inherits land that had a basis to the decedent of $95,000 and a fair market value of $50,000 on August 4, 2019, the date of the decedent's death. The executor distributes the land to Kelly on November 12, 2019, at which time the fair market value is $49,000. The fair market value on February 4, 2020, is $45,000. In filing the estate tax return, the executor elects the alternate valuation date. Kelly sells the land on June 10, 2020, for $48,000. What is her recognized gain or loss?

Annette purchased stock on March 1, 2019, for $200,000. At December 31, 2019, it was worth $210,000. She also purchased a bond on September 1, 2019, for $20,000. At year-end, it was worth $15,000. Determine Annette's realized and recognized gain or loss.