Question 1

Berly Company transferred an old asset with a $12,300 adjusted tax basis in exchange for a new asset worth $20,000.Which of the following statements is false?

Accepted Answer

A) The old asset's FMV is $20,000. 
B) If the exchange is nontaxable,Berly's tax basis in the new asset is $12,300. 
C) If the exchange is taxable,Berly's recognized gain is $7,700. 
D) None of the statements is false. 
A) The old asset's FMV is $20,000. 
B) If the exchange is nontaxable,Berly's tax basis in the new asset is $12,300. 
C) If the exchange is taxable,Berly's recognized gain is $7,700. 
D) None of the statements is false.

Question 2

Kornek Inc.transferred an old asset with a $200,000 adjusted tax basis plus $12,000 cash in exchange for a new asset worth $260,000.Which of the following statements is false?

Accepted Answer

A) If the exchange is taxable,Kornek recognizes a $48,000 gain. 
B) If the exchange is nontaxable,Kornek recognizes a $12,000 gain. 
C) If the exchange is nontaxable,Kornek's tax basis in the new asset is $212,000. 
D) None of the statements is false. 
A) If the exchange is taxable,Kornek recognizes a $48,000 gain. 
B) If the exchange is nontaxable,Kornek recognizes a $12,000 gain. 
C) If the exchange is nontaxable,Kornek's tax basis in the new asset is $212,000. 
D) None of the statements is false.

Question 3

Yelano Inc.exchanged an old forklift used in its business for a new forklift.This exchange qualifies as a nontaxable like-kind exchange.

Accepted Answer

A) True 
 B)False

Question 4

G&G Inc.transferred an old asset with a $110,300 adjusted tax basis plus $20,000 cash in exchange for a new asset worth $150,000.Which of the following statements is false?

Accepted Answer

A) The old asset's FMV is $150,000. 
B) If the exchange is nontaxable,G&G's recognized gain is -0-. 
C) If the exchange is nontaxable,G&G's tax basis in the new asset is $130,300. 
D) None of the statements is false. 
A) The old asset's FMV is $150,000. 
B) If the exchange is nontaxable,G&G's recognized gain is -0-. 
C) If the exchange is nontaxable,G&G's tax basis in the new asset is $130,300. 
D) None of the statements is false.

Question 5

Nixon Inc.transferred Asset A to an unrelated party in exchange for Asset Z and $15,750 cash.Nixon's tax basis in Asset A was $400,000,and Asset Z had a $510,000 appraised FMV.Which of the following statements is true?

Accepted Answer

A) If Asset A and Asset Z are like-kind property,Nixon recognizes a $15,750 gain and takes a $400,000 basis in Asset Z. 
B) If Asset A and Asset Z are not like-kind property,Nixon recognizes a $110,000 gain and takes a $510,000 basis in Asset Z. 
C) If Asset A and Asset Z are like-kind property,Nixon recognizes a $15,750 gain and takes a $415,750 basis in Asset Z.If Asset A and Asset Z are like-kind property,Nixon recognizes no gain and takes a $400,000 basis in Asset Z. 
D) If Asset A and Asset Z are like-kind property,Nixon recognizes a $15,750 gain and takes a $415,750 basis in Asset Z. 
A) If Asset A and Asset Z are like-kind property,Nixon recognizes a $15,750 gain and takes a $400,000 basis in Asset Z. 
B) If Asset A and Asset Z are not like-kind property,Nixon recognizes a $110,000 gain and takes a $510,000 basis in Asset Z. 
C) If Asset A and Asset Z are like-kind property,Nixon recognizes a $15,750 gain and takes a $415,750 basis in Asset Z.If Asset A and Asset Z are like-kind property,Nixon recognizes no gain and takes a $400,000 basis in Asset Z. 
D) If Asset A and Asset Z are like-kind property,Nixon recognizes a $15,750 gain and takes a $415,750 basis in Asset Z.

Question 6

Hank exchanged an old asset with a $12,000 adjusted basis for a new asset with a $32,000 FMV plus $2,000 cash.Compute Hank's realized and recognized gain if the new and old assets are like-kind properties.

Accepted Answer

A) $20,000 realized gain; $0 recognized gain 
B) $22,000 realized gain; $0 recognized gain 
C) $22,000 realized gain; $2,000 recognized gain 
D) $2,000 realized gain; $2,000 recognized gain 
A) $20,000 realized gain; $0 recognized gain 
B) $22,000 realized gain; $0 recognized gain 
C) $22,000 realized gain; $2,000 recognized gain 
D) $2,000 realized gain; $2,000 recognized gain

Question 7

Toffel Inc.exchanged investment land subject to a $240,000 mortgage for unencumbered farmland.If Toffel realized a $168,000 gain on the exchange,it must recognize the entire gain.

Accepted Answer

A) True 
 B)False

Question 8

A taxpayer who transfers property for corporate stock can defer gain recognition only if the taxpayer owns at least 50% of the corporation's outstanding stock immediately after the exchange.

Accepted Answer

A) True 
 B)False

Question 9

All types of business and investment real properties are like-kind.

Accepted Answer

A) True 
 B)False

Question 10

A partnership always takes a carryover basis in property received from a partner in exchange for an equity interest in the partnership.

Accepted Answer

A) True 
 B)False

Question 11

Mr.Jamail transferred business personalty (FMV $187,000; adjusted tax basis $29,900)to J&K Partnership in exchange for a partnership interest.Which of the following statements is true?

Accepted Answer

A) If Mr.Jamail owns a 14% partnership interest immediately after the exchange,he must recognize a $157,100 gain. 
B) If Mr.Jamail owns 34% partnership interest immediately after the exchange,he recognizes no gain on the exchange. 
C) If Mr.Jamail owns a 14% partnership interest immediately after the exchange,his tax basis in the interest is $187,000. 
D) Statements A and C are true. 
A) If Mr.Jamail owns a 14% partnership interest immediately after the exchange,he must recognize a $157,100 gain. 
B) If Mr.Jamail owns 34% partnership interest immediately after the exchange,he recognizes no gain on the exchange. 
C) If Mr.Jamail owns a 14% partnership interest immediately after the exchange,his tax basis in the interest is $187,000. 
D) Statements A and C are true.

Question 12

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 Babex's gain recognized on the exchange and its tax basis in the property received from OMG.

Accepted Answer

A) $175,000 gain recognized; $768,000 basis in OMG property. 
B) No gain recognized; $768,000 basis in OMG property. 
C) $175,000 gain recognized; $943,000 basis in OMG property. 
D) None of the choices are correct. 
A) $175,000 gain recognized; $768,000 basis in OMG property. 
B) No gain recognized; $768,000 basis in OMG property. 
C) $175,000 gain recognized; $943,000 basis in OMG property. 
D) None of the choices are correct.

Question 13

IPM Inc.and Zeta Company formed IPeta Inc.by transferring business assets in exchange for 1,000 shares of IPeta common stock.IPM transferred assets with a $675,000 FMV and a $283,000 adjusted tax basis and received 600 shares.Zeta transferred assets with a $450,000 FMV and a $98,000 adjusted tax basis and received 400 shares.Which of the following statements is false?

Accepted Answer

A) IPM's 600 shares of stock are worth $675,000. 
B) Zeta's gain realized on the exchange is $392,000. 
C) The exchange of stock for assets is nontaxable to IPeta. 
D) None of the above is false. 
A) IPM's 600 shares of stock are worth $675,000. 
B) Zeta's gain realized on the exchange is $392,000. 
C) The exchange of stock for assets is nontaxable to IPeta. 
D) None of the above is false.

Question 14

Mrs.Brinkley transferred business property (FMV $340,200; adjusted tax basis $111,700)to M&W Inc.in exchange for a 36% interest in M&W Partnership.Compute M&W's recognized gain on its exchange of an equity interest for property and determine M&W's tax basis in the property received from Mrs.Brinkley.

Accepted Answer

A) No gain recognized; $340,200 tax basis in property 
B) No gain recognized; $111,700 tax basis in property 
C) $340,200 gain recognized; $111,700 tax basis in property 
D) $111,700 gain recognized; $111,700 tax basis in property 
A) No gain recognized; $340,200 tax basis in property 
B) No gain recognized; $111,700 tax basis in property 
C) $340,200 gain recognized; $111,700 tax basis in property 
D) $111,700 gain recognized; $111,700 tax basis in property

Question 15

A taxpayer who receives boot in a nontaxable exchange must recognize gain equal to the lesser of the FMV of the boot or the gain realized.

Accepted Answer

A) True 
 B)False

Question 16

A fire destroyed furniture and fixtures used in Jock's business.Jock's adjusted basis in the furniture and fixtures was $81,300.Jock received a $100,000 reimbursement from his insurance company and immediately spent $93,000 to purchase new furniture and fixtures.How much gain or loss must Jock recognize on this involuntary conversion?

Accepted Answer

A) $18,700 
B) $11,700 
C) $7,000 
D) $0 
A) $18,700 
B) $11,700 
C) $7,000 
D) $0

Question 17

The goodwill of one business is never of a like-kind to the goodwill of a different business.

Accepted Answer

A) True 
 B)False

Question 18

Five years ago,Q&J Inc.transferred land with a $345,000 book and tax basis for a different parcel of land worth $472,000.Q&J included its $127,000 realized gain in book income,but the exchange was nontaxable.This year,Q&J sold the parcel of land received in the exchange for $533,000 cash.Which of the following statements is true?

Accepted Answer

A) The nontaxable exchange had no effect on Q&J's deferred tax accounts. 
B) The nontaxable exchange resulted in a deferred tax liability that reversed this year. 
C) The nontaxable exchange resulted in a deferred tax asset that reversed this year. 
D) The sale of the parcel of land had no effect on Q&J's deferred tax accounts. 
A) The nontaxable exchange had no effect on Q&J's deferred tax accounts. 
B) The nontaxable exchange resulted in a deferred tax liability that reversed this year. 
C) The nontaxable exchange resulted in a deferred tax asset that reversed this year. 
D) The sale of the parcel of land had no effect on Q&J's deferred tax accounts.

Question 19

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

Accepted Answer

A) The purpose of including boot in a nontaxable exchange is to equalize the adjusted tax bases of the properties exchanged. 
B) The receipt of boot can trigger gain recognition but not loss recognition. 
C) The party paying the boot includes the FMV of the boot in the tax basis of the property received. 
D) None of the above is false. 
A) The purpose of including boot in a nontaxable exchange is to equalize the adjusted tax bases of the properties exchanged. 
B) The receipt of boot can trigger gain recognition but not loss recognition. 
C) The party paying the boot includes the FMV of the boot in the tax basis of the property received. 
D) None of the above is false.

Question 20

The substituted basis rule results in permanent nonrecognition of gains and losses realized in a nontaxable exchange.

Accepted Answer

A) True 
 B)False

Berly Company transferred an old asset with a $12,300 adjusted tax basis in exchange for a new asset worth $20,000.Which of the following statements is false?

Kornek Inc.transferred an old asset with a $200,000 adjusted tax basis plus $12,000 cash in exchange for a new asset worth $260,000.Which of the following statements is false?

Yelano Inc.exchanged an old forklift used in its business for a new forklift.This exchange qualifies as a nontaxable like-kind exchange.

G&G Inc.transferred an old asset with a $110,300 adjusted tax basis plus $20,000 cash in exchange for a new asset worth $150,000.Which of the following statements is false?

Nixon Inc.transferred Asset A to an unrelated party in exchange for Asset Z and $15,750 cash.Nixon's tax basis in Asset A was $400,000,and Asset Z had a $510,000 appraised FMV.Which of the following statements is true?

Hank exchanged an old asset with a $12,000 adjusted basis for a new asset with a $32,000 FMV plus $2,000 cash.Compute Hank's realized and recognized gain if the new and old assets are like-kind properties.

Toffel Inc.exchanged investment land subject to a $240,000 mortgage for unencumbered farmland.If Toffel realized a $168,000 gain on the exchange,it must recognize the entire gain.

A taxpayer who transfers property for corporate stock can defer gain recognition only if the taxpayer owns at least 50% of the corporation's outstanding stock immediately after the exchange.

All types of business and investment real properties are like-kind.

A partnership always takes a carryover basis in property received from a partner in exchange for an equity interest in the partnership.

Mr.Jamail transferred business personalty (FMV $187,000; adjusted tax basis $29,900)to J&K Partnership in exchange for a partnership interest.Which of the following statements is true?

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 Babex's gain recognized on the exchange and its tax basis in the property received from OMG.

A taxpayer who receives boot in a nontaxable exchange must recognize gain equal to the lesser of the FMV of the boot or the gain realized.

The goodwill of one business is never of a like-kind to the goodwill of a different business.

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

The substituted basis rule results in permanent nonrecognition of gains and losses realized in a nontaxable exchange.

Taxes and Taxing Jurisdictions

Policy Standards for a Good Tax

Taxes As Transaction Costs

Maxims of Income Tax Planning

Tax Research

Taxable Income From Business Operations

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Sole Proprietorships, partnerships, llcs, and S Corporations

The Corporate Taxpayer

The Choice of Business Entity

Jurisdictional Issues in Business Taxation

The Individual Tax Formula

Compensation and Retirement Planning

Investment and Personal Financial Planning

Tax Consequences of Personal Activities

The Tax Compliance Process

Filters

Exam 9: Nontaxable Exchanges

Berly Company transferred an old asset with a $12,300 adjusted tax basis in exchange for a new asset worth $20,000.Which of the following statements is false?

Kornek Inc.transferred an old asset with a $200,000 adjusted tax basis plus $12,000 cash in exchange for a new asset worth $260,000.Which of the following statements is false?

Yelano Inc.exchanged an old forklift used in its business for a new forklift.This exchange qualifies as a nontaxable like-kind exchange.

G&G Inc.transferred an old asset with a $110,300 adjusted tax basis plus $20,000 cash in exchange for a new asset worth $150,000.Which of the following statements is false?

Nixon Inc.transferred Asset A to an unrelated party in exchange for Asset Z and $15,750 cash.Nixon's tax basis in Asset A was $400,000,and Asset Z had a $510,000 appraised FMV.Which of the following statements is true?

Hank exchanged an old asset with a $12,000 adjusted basis for a new asset with a $32,000 FMV plus $2,000 cash.Compute Hank's realized and recognized gain if the new and old assets are like-kind properties.

Toffel Inc.exchanged investment land subject to a $240,000 mortgage for unencumbered farmland.If Toffel realized a $168,000 gain on the exchange,it must recognize the entire gain.

A taxpayer who transfers property for corporate stock can defer gain recognition only if the taxpayer owns at least 50% of the corporation's outstanding stock immediately after the exchange.

All types of business and investment real properties are like-kind.

A partnership always takes a carryover basis in property received from a partner in exchange for an equity interest in the partnership.

Mr.Jamail transferred business personalty (FMV $187,000; adjusted tax basis $29,900)to J&K Partnership in exchange for a partnership interest.Which of the following statements is true?

A taxpayer who receives boot in a nontaxable exchange must recognize gain equal to the lesser of the FMV of the boot or the gain realized.

The goodwill of one business is never of a like-kind to the goodwill of a different business.

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

The substituted basis rule results in permanent nonrecognition of gains and losses realized in a nontaxable exchange.

Taxes and Taxing Jurisdictions

Policy Standards for a Good Tax

Taxes As Transaction Costs

Maxims of Income Tax Planning

Tax Research

Taxable Income From Business Operations

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Sole Proprietorships, partnerships, llcs, and S Corporations

The Corporate Taxpayer

The Choice of Business Entity

Jurisdictional Issues in Business Taxation

The Individual Tax Formula

Compensation and Retirement Planning

Investment and Personal Financial Planning

Tax Consequences of Personal Activities

The Tax Compliance Process

Filters