Exam 12: Special Property Transactions

Edith owns farm land in western Montana.Her adjusted basis is $300,000 and the land is subject to a mortgage of $150,000.She exchanges her land for investment land in Wyoming owned by Dale.The investment land is worth $450,000.Dale assumes Edith's mortgage on the land.What is the amount of Edith's recognized gain or loss on the exchange and what is her adjusted basis in the land she received?

With an involuntary conversion,what is the time limit to purchase replacement property?

An involuntary conversion results in money received.If the replacement property is purchased within the two-year period,the basis of the new property is its cost less the deferred gain.

The replacement period for an involuntary conversion always ends two years after the close of the first taxable year in which any part of the gain is realized.

A dealer of equipment can recognize gains using the installment method.

Gain realized on a like-kind exchange is excluded from income in all of the following circumstances except:

The exchange of a 5-year class asset for a 7-year class asset would not qualify for "like-kind" treatment.

The receipt of boot in a like-kind exchange causes the recognition of a realized gain.

On February 12,2017,Nelson sells stock (basis $175,000)to his son Wayne for $150,000,the stock's fair market value on the date of the sale.On October 21,2017,Wayne sells the stock to an unrelated party.In each of the following independent cases,determine the tax consequences of the transactions to Nelson and Wayne. a.Wayne sells the stock for $140,000. b.Wayne sells the stock for $180,000. c.Wayne sells the stock for $165,000.

When a taxpayer is released from a liability in a like-kind exchange,the amount of the release:

Depreciation recapture on an asset sold using the installment method is recognized ratably as payments are received.

If one spouse sells a home and excludes the gain on the sale,the gain on the sale of a residence by the other spouse is:

An installment sale of a building used in a trade or business is reported on what form?

The installment method cannot be used to report gain from the sale of stock or securities that are traded on an established securities market.

All of the following taxpayers can use the installment method to report gains from the sale of assets except:

When a loss is disallowed under the related party loss rules,the loss:

Libby exchanges a building she uses in her rental business for a building owned by Randy which she will use in her rental business.The adjusted basis of Libby's building is $80,000 and the fair market value is $125,000.The adjusted basis of Randy's building is $40,000 and the fair market value is $125,000.What is Libby's recognized gain on the transaction and her adjusted basis in the building she receives?

The IRC Section 121 exclusion of gain on the sale of a residence applies to the taxpayer's principal residence and a vacation home.

The "similar or related in service or use" requirement for property involuntarily converted is less restrictive than the like-kind exchange requirements.

On December 28,2017,Misty sold 300 shares of Low Grade,Inc.(a publicly traded company)at a loss of $8,500.On January 5,2018,thinking that the stock price would rebound,Misty purchased 200 shares of Low Grade,Inc.for $7,000.What is the amount of the recognized loss on the December 28,2017 sale and what is Misty's basis in the 200 shares she purchased on January 5,2018?