Exam 9: Nontaxable Exchanges

Babex Inc.and OMG Company entered into an exchange of real property.Here is the information for the properties to be exchanged. Pursuant to the exchange,OMG assumed the mortgage on the Babex property.Compute OMG's gain recognized on the exchange and its tax basis in the property received from Babex.

Signo Inc.'s current year income statement includes a $21,000 gain realized on the exchange of an old business asset for a new business asset.If the exchange is nontaxable,Signo has a $21,000 favorable permanent book/tax difference.

A taxpayer who exchanges property for an interest in a partnership never recognizes gain or loss on the exchange.

Eliot Inc.transferred an old asset with a $53,100 adjusted tax basis plus $5,000 cash in exchange for a new asset worth $75,000.Which of the following statements is false?

Johnson Inc.and C&K Company entered into an exchange of real property.Here is the information for the properties to be exchanged. Pursuant to the exchange,C&K paid $25,000 cash to Johnson and assumed the mortgage on the Johnson property.Compute C&K's gain recognized on the exchange and its tax basis in the property received from Johnson.

Loonis Inc.and Rhea Company formed LooNR Inc.by transferring business assets in exchange for 1,000 shares of LooNR common stock.Loonis transferred assets with a $820,000 FMV and a $444,000 adjusted tax basis and received 820 shares.Rhea transferred assets with a $180,000 FMV and a $75,000 adjusted tax basis and received 180 shares.Determine Loonis and Rhea's tax basis in their LooNR stock and LooNR's aggregate tax basis in the transferred assets.

If a taxpayer elected to defer a $13,000 gain realized on an involuntary conversion,the tax basis of the taxpayer's replacement property equals the cost of the property less $13,000.

Doppia Company transferred an old asset with a $68,750 adjusted tax basis in exchange for a new asset worth $90,000 and $10,000 cash.Which of the following statements is false?

Which of the following statements about boot included in a nontaxable exchange is false?

Which of the following statements about the transfer of debt in a like-kind exchange is false?

Sissoon Inc.exchanged a business asset for an investment asset.Both assets had a $620,000 appraised FMV.Sissoon's book basis in the business asset was $518,900,and its tax basis was $443,400. a.Compute Sissoon's book and tax gain if the business asset and investment asset were like-kind properties for tax purposes. b.Determine Sissoon's book and tax basis of the investment asset acquired in the nontaxable exchange properties for tax purposes. c.Compute Sissoon's book and tax gain if the business asset and investment asset were not like-kind properties for tax purposes. d.Determine Sissoon's book and tax basis of the investment asset acquired in the taxable exchange.

Mrs.Brinkley transferred business property (FMV $340,200; adjusted tax basis $111,700)to M&W Inc.in exchange for 4,200 shares of M&W stock.Immediately after the exchange,M&W had 7,800 shares of outstanding stock.Compute M&W's recognized gain on its exchange of stock for property and determine M&W's tax basis in the property received from Mrs.Brinkley.

When unrelated parties agree to an exchange of noncash properties,the economic presumption is that the properties have the same adjusted book basis.

V&P Company exchanged unencumbered investment land for farmland subject to a $200,000 mortgage.If V&P realized a $168,000 gain on the exchange,it must recognize the entire gain.

Which of the following statements about nontaxable exchanges is true?

Thieves stole computer equipment used by Ms.James in her small business.Ms.James' tax basis in the equipment was zero.One month after the theft,she received a $17,600 reimbursement from her casualty insurance company and used $14,850 to replace the computer equipment.She used the $2,750 remaining reimbursement to purchase a new desk for her office.Which of the following statements is false?

Kimbo Inc.exchanged an old asset ($180,000 FMV and $145,000 adjusted basis)plus $10,000 cash for a new asset with a $190,000 FMV.What is Kimbo's basis in the new asset if the transaction qualifies as a like-kind exchange?

Tibco Inc.exchanged an equity interest in ABM Partnership for an equity interest in Jolla Partnership.This exchange is taxable.

Mr.Bentley exchanged investment land subject to a $300,000 mortgage for commercial real estate subject to a $188,000 mortgage.Mr.Bentley is treated as paying $112,000 boot in the exchange.

Which of the following statements about the wash sale rule is false?