Question 1

All of the following are deferral provisions except:

Accepted Answer

A) Sale of a personal residence 
B) Like-kind exchange 
C) Exchange of a life insurance contract for an annuity contract 
D) Property transfers pursuant to divorce proceedings 
A) Sale of a personal residence 
B) Like-kind exchange 
C) Exchange of a life insurance contract for an annuity contract 
D) Property transfers pursuant to divorce proceedings A

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 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 D

Question 3

What is the amount of the casualty loss on a business truck that had a fair market value of $14,000 before an accident and $4,000 after an accident, if its adjusted basis is zero?

Accepted Answer

A) $14,000 
B) $10,000 
C) $4,000 
D) 0 
A) $14,000 
B) $10,000 
C) $4,000 
D) 0 D

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 gain does Emily recognize?

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 6

Sean inherited a farm his grandfather had purchased 50 years ago for $40,000.It was valued at $1,000,000 when his grandfather died but has a current value of $1,100,000.Sean did not like farming so he traded the farm land and buildings for an apartment building valued at $950,000 owned by Jean that has a basis of $700,000.In addition, Sean received $150,000 in cash from Jean to finalize the exchange.

Accepted Answer

A) What are the amounts realized by Sean and Jean on the exchange? 
B) What are the gains or losses realized by Sean and Jean on the exchange? 
C) What are the gains or losses recognized by Sean and Jean on the exchange? 
D) What are the bases of the properties received by Sean and Jean? 
A) What are the amounts realized by Sean and Jean on the exchange? 
B) What are the gains or losses realized by Sean and Jean on the exchange? 
C) What are the gains or losses recognized by Sean and Jean on the exchange? 
D) What are the bases of the properties received by Sean and Jean?

Question 7

The loss on the total destruction of business property is always its adjusted basis regardless of fair market value.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is not a divisive reorganization?

Accepted Answer

A) Spin out 
B) Split up 
C) Spin off 
D) Split off 
A) Spin out 
B) Split up 
C) Spin off 
D) Split off

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

James corporation exchanges a building (fair market value = $800,000, adjusted basis = $600,000) that has a $100,000 mortgage for another building owned by Pete Corporation (fair market value = $1,100,000, adjusted basis = $600,000) that is encumbered by a $400,000 mortgage.Each party assumed the mortgage on the building received.What are James's and Pete's recognized gains on the exchange, respectively?

Accepted Answer

A) 0, 0 
B) 0, $300,000 
C) $100,000, 0 
D) $100,000, $400,000 
A) 0, 0 
B) 0, $300,000 
C) $100,000, 0 
D) $100,000, $400,000

Question 11

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 12

The holding period for boot in a like-kind exchange begins on the date of the exchange.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is not a characteristic of involuntary conversions?

Accepted Answer

A) Gain only is deferred 
B) The taxpayer can receive cash to invest in qualifying replacement property 
C) The provision applies to both realty and personalty 
D) All of these are characteristics 
A) Gain only is deferred 
B) The taxpayer can receive cash to invest in qualifying replacement property 
C) The provision applies to both realty and personalty 
D) All of these are characteristics

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

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 recognized 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 16

A taxpayer must transfer a minimum required amount of property, along with any services performed, to include the stock received in meeting the control requirement for a corporate formation.

Accepted Answer

A) True 
 B)False

Question 17

Georgia's home was damaged by flood.Its adjusted basis before the flood was $90,000.Georgia deducted a $50,000 casualty loss on her tax return and she was able to have the house repaired for $40,000.What is Georgia's basis in the house after the repairs?

Accepted Answer

A) $ 40,000 
B) $ 80,000 
C) $ 90,000 
D) $125,000 
A) $ 40,000 
B) $ 80,000 
C) $ 90,000 
D) $125,000

Question 18

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 building it received from Emily?

Accepted Answer

A) $10,000 
B) $15,000 
C) $20,000 
D) $35,000 
A) $10,000 
B) $15,000 
C) $20,000 
D) $35,000

Question 19

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 20

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

Accepted Answer

A) True 
 B)False

All of the following are deferral provisions except:

What is the amount of the casualty loss on a business truck that had a fair market value of $14,000 before an accident and $4,000 after an accident, if its adjusted basis is zero?

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?

The loss on the total destruction of business property is always its adjusted basis regardless of fair market value.

Which of the following is not a divisive reorganization?

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

The holding period for boot in a like-kind exchange begins on the date of the exchange.

Which of the following is not a characteristic of involuntary conversions?

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 recognized gain on the exchange?

A taxpayer must transfer a minimum required amount of property, along with any services performed, to include the stock received in meeting the control requirement for a corporate formation.

Georgia's home was damaged by flood.Its adjusted basis before the flood was $90,000.Georgia deducted a $50,000 casualty loss on her tax return and she was able to have the house repaired for $40,000.What is Georgia's basis in the house after the repairs?

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

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

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

All of the following are deferral provisions except:

What is the amount of the casualty loss on a business truck that had a fair market value of $14,000 before an accident and $4,000 after an accident, if its adjusted basis is zero?

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?

The loss on the total destruction of business property is always its adjusted basis regardless of fair market value.

Which of the following is not a divisive reorganization?

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

The holding period for boot in a like-kind exchange begins on the date of the exchange.

Which of the following is not a characteristic of involuntary conversions?

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 recognized gain on the exchange?

A taxpayer must transfer a minimum required amount of property, along with any services performed, to include the stock received in meeting the control requirement for a corporate formation.

Georgia's home was damaged by flood.Its adjusted basis before the flood was $90,000.Georgia deducted a $50,000 casualty loss on her tax return and she was able to have the house repaired for $40,000.What is Georgia's basis in the house after the repairs?

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

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

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