Question 1

What is the difference between a carryover basis and a substituted basis?

Accepted Answer

When there is a transfer of property bet

Question 2

If a taxpayer's personal residence is involuntarily converted, the taxpayer can only defer gain by acquiring a new residence in the required time period using IRC §1033.

Accepted Answer

A) True 
 B)False

Question 3

How long does a taxpayer who realizes gain have to replace real property that has been condemned?

Accepted Answer

The taxpayer has three years f

Question 4

Elizabeth exchanges an office building valued at $400,000 with a $75,000 mortgage and adjusted basis of $180,000 for land valued at $275,000. What is Elizabeth's basis in the land received in the exchange?

Accepted Answer

A)  $400,000 
B)  $275,000 
C)  $180,000 
D)  $75,000 
A)  $400,000 
B)  $275,000 
C)  $180,000 
D)  $75,000

Question 5

Four shareholders form a new corporation in exchange for stock with a fair market value of $1,000 per share. Benjamin transfers investment land (current fair market value of $35,000) that he purchased 10 year ago for $15,000. In exchange, Benjamin receives 30 shares of stock and $5,000 cash. Andrew transfers a machine with a basis of $45,000 and a fair market value of $35,000. Andrew receives 30 shares of stock and $5,000 cash. Emily transfers a rental office building (current fair market value of $45,000) that she purchased 20 years ago for $60,000. Its current basis is $15,000 after recognition of $45,000 in depreciation expense. The corporation assumes the $20,000 balance on the original mortgage and Emily receives 25 shares of stock from the corporation in the exchange. Jackson provided the legal services to organize the corporation (value $5,000) and contributes $10,000 in cash in exchange for 15 shares of stock. How much income or gain does Jackson recognize?

Accepted Answer

A)  $0 
B)  $5,000 
C)  $10,000 
D)  $15,000 
A)  $0 
B)  $5,000 
C)  $10,000 
D)  $15,000

Question 6

In a qualified reorganization:

Accepted Answer

A)  Gain is generally deferred. 
B)  Only stock can be exchanged for stock. 
C)  One corporation must acquire all the assets of another corporation. 
D)  Two or more corporations are always involved. 
A)  Gain is generally deferred. 
B)  Only stock can be exchanged for stock. 
C)  One corporation must acquire all the assets of another corporation. 
D)  Two or more corporations are always involved.

Question 7

How is the basis of stock received for appreciated property in a Section 351 transfer determined?

Accepted Answer

The basis of stock received for apprecia

Question 8

Sophie received a 30 percent interest in a general partnership in exchange for property valued at $35,000 (adjusted basis = $25,000) and services valued at $5,000. In addition, the partnership assumed the $10,000 liability on the property. What is Sophie's basis in her partnership interest?

Accepted Answer

A)  $20,000 
B)  $23,000 
C)  $25,000 
D)  $39,000 
A)  $20,000 
B)  $23,000 
C)  $25,000 
D)  $39,000

Question 9

How is a new partner's basis in a partnership interest determined if the partnership has no liabilities?

Accepted Answer

The basis of an entering partn

Question 10

What effect do liabilities assumed by the partnership have on a partner's basis?

Accepted Answer

Liabilities of a partner assumed by a pa

Question 11

Which type of reorganization does not entail a transfer of assets for stock?

Accepted Answer

A)  Type A 
B)  Type B 
C)  Type C 
D)  Type D 
A)  Type A 
B)  Type B 
C)  Type C 
D)  Type D

Question 12

Corporation P acquires 95 percent of Corporation T's assets for $19.5 million of P's stock in a qualifying reorganization. The assets transferred have a basis of $14 million. T retained $500,000 of cash to pay its remaining liabilities. It only used $200,000 of the cash and the remaining cash and P stock are distributed to T's shareholder, who has a basis of $14 million in her stock. What is the gain recognized on this reorganization?

Accepted Answer

A)  0 
B)  $300,000 
C)  $5.5 million 
D)  $7.5 million 
A)  0 
B)  $300,000 
C)  $5.5 million 
D)  $7.5 million

Question 13

Wally's investment real estate was condemned on November 14, 2018. On February 14, 2019, he received $250,000 for the property that had a basis of $210,000. What is the last date that Wally can acquire replacement property to avoid gain recognition?

Accepted Answer

A)  November 14, 2021 
B)  February 14, 2022 
C)  December 31, 2021 
D)  December 31, 2022 
A)  November 14, 2021 
B)  February 14, 2022 
C)  December 31, 2021 
D)  December 31, 2022

Question 14

To defer gain recognition on an involuntary conversion, qualifying property must be obtained
within a specified time period.

Accepted Answer

A) True 
 B)False

Question 15

On November 4, 2017, Tom purchased 2,000 shares of DDD stock for $20,000. On June 2, 2018, Tom sold the 2,000 shares for $14,000. On June 30, 2018, he purchased 1,000 shares of DDD stock for $5,000. What is Tom's realized and recognized gain or loss on the June 2, 2018 sale and his basis in the stock from the June 30 purchase?

Accepted Answer

This is a wash sale for 1,000 of the 2,0

Question 16

The taxpayer-use test for qualifying replacement property

Accepted Answer

A)  applies only to personalty 
B)  requires replacement property used by the taxpayer to be used in the same business as the converted property 
C)  only requires leased realty to be replaced with other leased realty 
D)  Is more restrictive than the functional-use test 
A)  applies only to personalty 
B)  requires replacement property used by the taxpayer to be used in the same business as the converted property 
C)  only requires leased realty to be replaced with other leased realty 
D)  Is more restrictive than the functional-use test

Question 17

Elizabeth exchanges an office building valued at $400,000 with a $75,000 mortgage and adjusted basis of $180,000 for land valued at $275,000. What is Elizabeth's realized gain on the exchange?

Accepted Answer

A)  zero 
B)  $95,000 
C)  $75,000 
D)  $170,000 
A)  zero 
B)  $95,000 
C)  $75,000 
D)  $170,000

Question 18

Twining Corporation has some land it wants to trade for a building owned by Clopp Corporation. Clopp does not want to exchange the building because it wants to recognize its loss on the building. Twining, however, does not want to recognize its gain. What alternative(s) does Twining have that will allow it to avoid recognizing gain?

Accepted Answer

A)  Twining can sell its land to a third party and take the money and purchase the building. 
B)  Twining can have a third party purchase the building and have the third party trade for the land. 
C)  Twining can complete a nonsimulataneous exchange within one year of identifying the desired property. 
D)  All of the above are acceptable alternatives. 
A)  Twining can sell its land to a third party and take the money and purchase the building. 
B)  Twining can have a third party purchase the building and have the third party trade for the land. 
C)  Twining can complete a nonsimulataneous exchange within one year of identifying the desired property. 
D)  All of the above are acceptable alternatives.

Question 19

Kaitlin purchased 100 shares of Norton Corporation stock for $11,500 on January 1, 2015. March 1, 2018, she purchased 30 additional shares of Norton Corporation for $3,000. On March 20, 2018, she sold 25 shares of the 100 shares she had purchased in 2015, for $2,500. What is Kaitlin's recognized gain or loss on the sale of the stock?

Accepted Answer

A)  $500 recognized loss 
B)  $375 recognized loss 
C)  $375 recognized gain 
D)  $0 recognized gain or loss 
A)  $500 recognized loss 
B)  $375 recognized loss 
C)  $375 recognized gain 
D)  $0 recognized gain or loss

Question 20

A theft loss of $10,000 cash by an individual results in a $10,000 casualty loss deduction.

Accepted Answer

A) True 
 B)False

What is the difference between a carryover basis and a substituted basis?

If a taxpayer's personal residence is involuntarily converted, the taxpayer can only defer gain by acquiring a new residence in the required time period using IRC §1033.

How long does a taxpayer who realizes gain have to replace real property that has been condemned?

Elizabeth exchanges an office building valued at $400,000 with a $75,000 mortgage and adjusted basis of $180,000 for land valued at $275,000. What is Elizabeth's basis in the land received in the exchange?

In a qualified reorganization:

How is the basis of stock received for appreciated property in a Section 351 transfer determined?

Sophie received a 30 percent interest in a general partnership in exchange for property valued at $35,000 (adjusted basis = $25,000) and services valued at $5,000. In addition, the partnership assumed the $10,000 liability on the property. What is Sophie's basis in her partnership interest?

How is a new partner's basis in a partnership interest determined if the partnership has no liabilities?

What effect do liabilities assumed by the partnership have on a partner's basis?

Which type of reorganization does not entail a transfer of assets for stock?

Wally's investment real estate was condemned on November 14, 2018. On February 14, 2019, he received $250,000 for the property that had a basis of $210,000. What is the last date that Wally can acquire replacement property to avoid gain recognition?

To defer gain recognition on an involuntary conversion, qualifying property must be obtained within a specified time period.

The taxpayer-use test for qualifying replacement property

Elizabeth exchanges an office building valued at $400,000 with a $75,000 mortgage and adjusted basis of $180,000 for land valued at $275,000. What is Elizabeth's realized gain on the exchange?

A theft loss of $10,000 cash by an individual results in a $10,000 casualty loss deduction.

Introduction to Taxation

The Tax Practice Environment

Determining Gross Income

Employee Compensation

Deductions for Individuals and Tax Determination

Business Expenses

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Taxation of Corporations

Sole Proprietorships and Flow-Through Entities

Estates, Gifts, and Trusts

Filters

Exam 9: Tax-Deferred Exchanges

What is the difference between a carryover basis and a substituted basis?

If a taxpayer's personal residence is involuntarily converted, the taxpayer can only defer gain by acquiring a new residence in the required time period using IRC §1033.

How long does a taxpayer who realizes gain have to replace real property that has been condemned?

Elizabeth exchanges an office building valued at $400,000 with a $75,000 mortgage and adjusted basis of $180,000 for land valued at $275,000. What is Elizabeth's basis in the land received in the exchange?

In a qualified reorganization:

How is the basis of stock received for appreciated property in a Section 351 transfer determined?

Sophie received a 30 percent interest in a general partnership in exchange for property valued at $35,000 (adjusted basis = $25,000) and services valued at $5,000. In addition, the partnership assumed the $10,000 liability on the property. What is Sophie's basis in her partnership interest?

How is a new partner's basis in a partnership interest determined if the partnership has no liabilities?

What effect do liabilities assumed by the partnership have on a partner's basis?

Which type of reorganization does not entail a transfer of assets for stock?

Wally's investment real estate was condemned on November 14, 2018. On February 14, 2019, he received $250,000 for the property that had a basis of $210,000. What is the last date that Wally can acquire replacement property to avoid gain recognition?

To defer gain recognition on an involuntary conversion, qualifying property must be obtained within a specified time period.

The taxpayer-use test for qualifying replacement property

Elizabeth exchanges an office building valued at $400,000 with a $75,000 mortgage and adjusted basis of $180,000 for land valued at $275,000. What is Elizabeth's realized gain on the exchange?

A theft loss of $10,000 cash by an individual results in a $10,000 casualty loss deduction.

Introduction to Taxation

The Tax Practice Environment

Determining Gross Income

Employee Compensation

Deductions for Individuals and Tax Determination

Business Expenses

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Taxation of Corporations

Sole Proprietorships and Flow-Through Entities

Estates, Gifts, and Trusts

Filters