Question 1

The holding period for property received in a qualifying like-kind exchange begins on the date the new property is received.

Accepted Answer

A) True 
 B)False

Question 2

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. What is Emily's basis in the stock she received?

Accepted Answer

A)  0 
B)  $5,000 
C)  $15,000 
D)  $20,000 
A)  0 
B)  $5,000 
C)  $15,000 
D)  $20,000

Question 3

Sam's land was condemned for a sewage treatment plant. He received $600,000 for the land that had a basis of $650,000. What is his realized and recognized gain or loss, respectively, on this involuntary conversion?

Accepted Answer

A)  ($50,000), ($50,000) 
B)  ($50,000), 0 
C)  $50,000, $50,000 
D)  0, 0 
A)  ($50,000), ($50,000) 
B)  ($50,000), 0 
C)  $50,000, $50,000 
D)  0, 0

Question 4

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. What is Benjamin's realized and recognized gain, respectively?

Accepted Answer

A)  $5,000, $20,000 
B)  $10,000, $15,000 
C)  $15,000, $10,000 
D)  $20,000, $5,000 
A)  $5,000, $20,000 
B)  $10,000, $15,000 
C)  $15,000, $10,000 
D)  $20,000, $5,000

Question 5

What effect does the assumption of liabilities by the corporation normally have on gain or loss recognition and stock basis determination by a transferring shareholder in a Section 351 transfer?

Accepted Answer

The assumption of liabilities by the cor

Question 6

Dylan, Luke, and Hannah form a partnership. Dylan contributes land with a fair market value of $25,000 (basis of $15,000) in exchange for a 25% interest. Luke contributes equipment with a $35,000 fair market value (basis of $38,000) in exchange for a 35% interest, and Hannah contributes a building with a $100,000 fair market value (basis = $35,000) and a mortgage of $60,000 (assumed by the partnership) in exchange for a 40% interest. What is Dylan's basis in his partnership interest?

Accepted Answer

A)  $15,000 
B)  $25,000 
C)  $30,000 
D)  $60,000 
A)  $15,000 
B)  $25,000 
C)  $30,000 
D)  $60,000

Question 7

Sid's home was destroyed by fire. He had purchased the home 18 months ago for $950,000. He received $1,300,000 from his insurance company to replace the home. If he fails to rebuild the home or acquire a replacement home in the required time, how much gain must he recognize on this conversion?

Accepted Answer

A)  $350,000 
B)  $162,500 
C)  $100,000 
D)  $0 
A)  $350,000 
B)  $162,500 
C)  $100,000 
D)  $0

Question 8

Which type of reorganization always involves an exchange of stock 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 9

Willow Corporation exchanged land valued at $250,000 (adjusted basis = $175,000) for a building owned by Tree Corporation valued at $350,000 (adjusted basis = $200,000) and $50,000 cash. In addition, Willow assumed the $150,000 mortgage on Tree's building. What are Willow and Tree's realized gains or losses on the properties exchanged, respectively?

Accepted Answer

A)  $75,000, 0 
B)  $75,000, $150,000 
C)  $225,000, $150,000 
D)  $225,000, $200,000 
A)  $75,000, 0 
B)  $75,000, $150,000 
C)  $225,000, $150,000 
D)  $225,000, $200,000

Question 10

Which of the following characteristics is the same for transfers of property to both a corporation and to a partnership in exchange solely for an ownership interest?

Accepted Answer

A)  The transferors must have control of the corporation or partnership after the transfer. 
B)  Liabilities assumed affect the owner's basis in the entity's business in the same manner. 
C)  Loss is not recognized. 
D)  The holding period for all the assets transferred begins on the date of the transfer. 
A)  The transferors must have control of the corporation or partnership after the transfer. 
B)  Liabilities assumed affect the owner's basis in the entity's business in the same manner. 
C)  Loss is not recognized. 
D)  The holding period for all the assets transferred begins on the date of the transfer.

Question 11

What is the limit of the gain that can be recognized on a like-kind exchange?

Accepted Answer

The recognized gain on a like-

Question 12

Which of the following is not a required characteristic of a qualifying Section 351 transaction?

Accepted Answer

A)  If more than 20 percent of the stock is transferred for services, property must also be transferred by the service provider. 
B)  Gain may be recognized if the transferor receives something other than stock. 
C)  The transferors must control the corporation after the transfer. 
D)  Control requires shareholders owning only 80 percent of the voting stock if nonvoting stock is outstanding. 
A)  If more than 20 percent of the stock is transferred for services, property must also be transferred by the service provider. 
B)  Gain may be recognized if the transferor receives something other than stock. 
C)  The transferors must control the corporation after the transfer. 
D)  Control requires shareholders owning only 80 percent of the voting stock if nonvoting stock is outstanding.

Question 13

Juan owned a small rental property, which was condemned by the county to expand a local park. His adjusted basis in the property was $40,000 and he received a payment of $75,000 from the county. A year later he purchased a similar piece of real estate for $70,000.What is Juan's recognized gain on the involuntary conversion of his rental property?

Accepted Answer

A)  $5,000 
B)  $10,000 
C)  $30,000 
D)  $35,000 
A)  $5,000 
B)  $10,000 
C)  $30,000 
D)  $35,000

Question 14

Dylan, Luke, and Hannah form a partnership. Dylan contributes land with a fair market value of $25,000 (basis of $15,000) in exchange for a 25% interest. Luke contributes equipment with a $35,000 fair market value (basis of $38,000) in exchange for a 35% interest, and Hannah contributes a building with a $100,000 fair market value (basis = $35,000) and a mortgage of $60,000 (assumed by the partnership) in exchange for a 40% interest. What is Luke's basis in his partnership interest?

Accepted Answer

A)  $35,000 
B)  $38,000 
C)  $56,000 
D)  $59,000 
A)  $35,000 
B)  $38,000 
C)  $56,000 
D)  $59,000

Question 15

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. What is the corporation's basis for the land it received from Benjamin?

Accepted Answer

A)  $5,000 
B)  $10,000 
C)  $15,000 
D)  $20,000 
A)  $5,000 
B)  $10,000 
C)  $15,000 
D)  $20,000

Question 16

Which type of reorganization does not allow the parent corporation to make a qualifying transfer to a subsidiary of the property received in the reorganization?

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 17

When is gain recognized in a like-kind exchange?

Accepted Answer

Gain is recognized on a like-k

Question 18

Which type of reorganization involves only one corporation?

Accepted Answer

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

Question 19

Simon purchased 1,000 shares of ABC stock for $8,000 on April 4. On March 1 he had sold 1,500 shares of ABC stock for $9,000 that he had purchased three months earlier for $15,000. What is Simon's realized and recognized loss, respectively, on the March 1 stock sale?

Accepted Answer

A)  $6,000, $6000 
B)  $6,000, 0 
C)  $6,000, $4,000 
D)  $4,000, $6,000 
A)  $6,000, $6000 
B)  $6,000, 0 
C)  $6,000, $4,000 
D)  $4,000, $6,000

Question 20

Which of the following would not be considered an involuntary conversion?

Accepted Answer

A)  The theft of jewelry 
B)  Sale of property in a flood zone 
C)  Condemnation of a building for a highway 
D)  Destruction of a home by a tornado 
A)  The theft of jewelry 
B)  Sale of property in a flood zone 
C)  Condemnation of a building for a highway 
D)  Destruction of a home by a tornado

The holding period for property received in a qualifying like-kind exchange begins on the date the new property is received.

Sam's land was condemned for a sewage treatment plant. He received $600,000 for the land that had a basis of $650,000. What is his realized and recognized gain or loss, respectively, on this involuntary conversion?

What effect does the assumption of liabilities by the corporation normally have on gain or loss recognition and stock basis determination by a transferring shareholder in a Section 351 transfer?

Sid's home was destroyed by fire. He had purchased the home 18 months ago for $950,000. He received $1,300,000 from his insurance company to replace the home. If he fails to rebuild the home or acquire a replacement home in the required time, how much gain must he recognize on this conversion?

Which type of reorganization always involves an exchange of stock for stock?

Which of the following characteristics is the same for transfers of property to both a corporation and to a partnership in exchange solely for an ownership interest?

What is the limit of the gain that can be recognized on a like-kind exchange?

Which of the following is not a required characteristic of a qualifying Section 351 transaction?

Which type of reorganization does not allow the parent corporation to make a qualifying transfer to a subsidiary of the property received in the reorganization?

When is gain recognized in a like-kind exchange?

Which type of reorganization involves only one corporation?

Simon purchased 1,000 shares of ABC stock for $8,000 on April 4. On March 1 he had sold 1,500 shares of ABC stock for $9,000 that he had purchased three months earlier for $15,000. What is Simon's realized and recognized loss, respectively, on the March 1 stock sale?

Which of the following would not be considered an involuntary conversion?

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

The holding period for property received in a qualifying like-kind exchange begins on the date the new property is received.

Sam's land was condemned for a sewage treatment plant. He received $600,000 for the land that had a basis of $650,000. What is his realized and recognized gain or loss, respectively, on this involuntary conversion?

What effect does the assumption of liabilities by the corporation normally have on gain or loss recognition and stock basis determination by a transferring shareholder in a Section 351 transfer?

Sid's home was destroyed by fire. He had purchased the home 18 months ago for $950,000. He received $1,300,000 from his insurance company to replace the home. If he fails to rebuild the home or acquire a replacement home in the required time, how much gain must he recognize on this conversion?

Which type of reorganization always involves an exchange of stock for stock?

Which of the following characteristics is the same for transfers of property to both a corporation and to a partnership in exchange solely for an ownership interest?

What is the limit of the gain that can be recognized on a like-kind exchange?

Which of the following is not a required characteristic of a qualifying Section 351 transaction?

Which type of reorganization does not allow the parent corporation to make a qualifying transfer to a subsidiary of the property received in the reorganization?

When is gain recognized in a like-kind exchange?

Which type of reorganization involves only one corporation?

Simon purchased 1,000 shares of ABC stock for $8,000 on April 4. On March 1 he had sold 1,500 shares of ABC stock for $9,000 that he had purchased three months earlier for $15,000. What is Simon's realized and recognized loss, respectively, on the March 1 stock sale?

Which of the following would not be considered an involuntary conversion?

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