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Exam 12: Property Transactions: Nontaxable Exchanges

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Question 61

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Juan's business delivery truck is destroyed in an accident. He paid $40,000 for the truck, and $30,000 of depreciation has been deducted during its period of use. The insurance company pays Juan $32,000 due to the accident. What is the minimum amount that Juan must spend on a new truck to avoid any gain recognition?

A) $40,000
B) $32,000
C) $10,000
D) $22,000

E) B) and D)
F) All of the above

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Question 62

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Nicki is single and 46 years old. She sells her principal residence (adjusted basis $200,000)that she purchased ten years ago for $435,000. a. What is the amount of Nicki's recognized gain on the sale? b. Assume instead that Nicki sells the residence for $485,000. What is the amount of Nicki's recognized gain on the sale? c. Assume instead that Nicki has been married to Mike for the entire time they have owned and lived in the home. If they sell the home for $485,000, what is the amount of their recognized gain on the sale?

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a. While Nicki's realized gain is $235,0...

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Question 63

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Theresa owns a yacht that is held for personal use and has a $100,000 basis. The yacht is destroyed by a storm and Theresa collects $120,000 from the insurance company. She purchases a new $150,000 yacht for personal use and elects to defer any gain on the transaction. What is the basis of the new yacht?

Discuss the basis rules of property received in a nontaxable like-kind exchange.

According to Sec. 121, individuals who sell or exchange their personal residence may exclude part or all of the gain if the house was owned and occupied as a principal residence for

Ron's building, which was used in his business, was destroyed in a fire. Ron's adjusted basis in the building was $210,000, and its FMV was $330,000. Ron filed an insurance claim and was reimbursed $300,000. In that same year, Ron invested $240,000 of the insurance proceeds in another business building. Ron will recognize gain of

The exchange of a partnership interest for an interest in another partnership qualifies as a like-kind exchange.

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

Jenna, who is single, sold her principal residence on December 1, 2013, and excluded the $150,000 gain because she met the ownership and usage requirements under Sec. 121. Jenna purchased another residence in Pensacola on January 1, 2014 that she occupied until July 1, 2014 when she receives a new job offer from an employer in Miami. She sells the Pensacola residence on October 1, 2014 and realizes a gain of $40,000. Jenna may exclude what amount of the gain from the sale on October 1, 2014?

If the threat of condemnation exists and the taxpayer has reasonable grounds to believe that the property will be condemned, the taxpayer may elect to defer gain even if the taxpayer sells the property to a party other than the governmental unit that is threatening to condemn the property.

If property is involuntarily converted into similar property, the basis and holding period of the converted property carry over to the basis and holding period of the replacement property.

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

The holding period for boot property received begins on the day after the date of the exchange.

James and Ellen Connors, who are both 50 years old and married, sell their personal residence on July 25, 2014 for $950,000. They have lived in the home for 20 years. The basis of the home is $350,000. They purchased a new home for $1,000,000 in August 2014. After living in that home for 219 days, the Connors were forced to sell their new home in 2015 for $1,300,000 and move to another climate due to Ellen's severe health problems. a. What is the amount of gain recognized on the home sale in 2014? b. What is the amount of the gain recognized on the home sale in 2015?

Ron's building, which was used in his business, was destroyed in a fire. Ron's adjusted basis in the building was $210,000, and its FMV was $330,000. Ron filed an insurance claim and was reimbursed $300,000. In that same year, Ron invested $240,000 of the insurance proceeds in another business building. Ron's basis in the new building is