Question 1

The time period to replace property destroyed in an involuntary conversion is two years from the event.

Accepted Answer

A) True 
 B)False

Question 2

Tanner,who is single,purchased a house on April 15,2000 for $215,000.During the time Tanner owned the house,he installed a swimming pool at a cost of $21,000 and replaced the deck at a cost of $18,000.On August 5,2014,Tanner sold the house for $570,000.Tanner paid a sales commission of $30,000 and legal fees of $800 connected with the sale of the house.What is Tanner's recognized gain on the sale of the house?

Accepted Answer

A)  $0. 
B)  $35,200. 
C)  $250,000. 
D)  $285,200. 
A)  $0. 
B)  $35,200. 
C)  $250,000. 
D)  $285,200.

Question 3

Raymond and Susan are married and 55 years old.They sell their personal residence for $850,000 cash.They purchased the house fifteen years ago for $200,000.What is the amount of gain that Raymond and Susan should recognize on the sale?

Accepted Answer

A)  $0. 
B)  $150,000. 
C)  $500,000. 
D)  $650,000. 
A)  $0. 
B)  $150,000. 
C)  $500,000. 
D)  $650,000.

Question 4

No deduction is allowed with respect to any loss from the sale or exchange of property,directly or indirectly,between related parties.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Knox operated a business which was damaged by a hurricane in 2014.His losses were as follows:
   a.What is Knox's net casualty loss (if any)assuming his AGI is $85,000 prior the deduction? Assume he properly replaced all assets.
b.What is his basis in replacement Asset 1 purchased for $8,000 assuming Knox elected the non-recognition of gain from an involuntary conversion?

Accepted Answer

a.$7,200 business casualty loss.The invo

Question 7

The contract price in an installment sale is:

Accepted Answer

A)  The selling price or the selling price reduced by any debt assumed by the buyer. 
B)  The selling price less the basis in the property. 
C)  The selling price less any selling expenses. 
D)  The gross profit divided by the selling price. 
A)  The selling price or the selling price reduced by any debt assumed by the buyer. 
B)  The selling price less the basis in the property. 
C)  The selling price less any selling expenses. 
D)  The gross profit divided by the selling price.

Question 8

An apartment building with an adjusted basis of $500,000 was destroyed by a tornado on April 30,2014.On May 10,2014,the insurance company paid the owner $695,000.The owner reinvested $570,000 in a new apartment complex.What is the basis of the new complex if non-recognition of gain from an involuntary conversion is elected?

Accepted Answer

A)  $500,000. 
B)  $570,000. 
C)  $625,000. 
D)  $695,000. 
A)  $500,000. 
B)  $570,000. 
C)  $625,000. 
D)  $695,000.

Question 9

A wash sale occurs when a taxpayer sells stock or securities at a loss and,within a period of 60 days before or 60 days after the sale,the taxpayer acquires substantially identical stock or securities.

Accepted Answer

A) True 
 B)False

Question 10

On February 12,2014,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 21,2014,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.

Accepted Answer

a.Nelson: $25,000 disallowed loss; Wayne

Question 11

Raymond exchanges a rental lake house with an adjusted basis of $200,000 and fair market value of $320,000 for a rental beach house with a fair market value of $290,000 and $30,000 cash.What are the recognized gain or loss and the basis of the beach house?

Accepted Answer

A)  $0 gain and $230,000 basis. 
B)  $30,000 gain and $200,000 basis. 
C)  $30,000 gain and $230,000 basis. 
D)  $120,000 gain and $320,000 basis. 
A)  $0 gain and $230,000 basis. 
B)  $30,000 gain and $200,000 basis. 
C)  $30,000 gain and $230,000 basis. 
D)  $120,000 gain and $320,000 basis.

Question 12

To qualify for the IRC Section 121 exclusion of gain on the sale of a residence,the taxpayer must have lived in the home for a continuous two-year period.

Accepted Answer

A) True 
 B)False

Question 13

On July 1,2014,DJ sold equipment used in her business and reported the gain using the installment method.Her adjusted basis in the equipment was $150,000.The equipment was subject to $30,000 of depreciation recapture.DJ sold the property for $250,000,with $100,000 due on the date of the sale and $150,000 (plus interest at the Federal rate)due on August 1,2015.What is the amount of gain recognized in 2014?

Accepted Answer

The answer of On July 1,2014,DJ sold equipment used in...

Question 14

Laverne exchanges a rental beach house with an adjusted basis of $400,000 and fair market value of $320,000 for a mini-storage building with a fair market value of $200,000 plus $120,000 cash.What is the recognized gain or loss on the exchange and the basis of the mini-storage building?

Accepted Answer

Since the assets are not like-kind,the l

Question 15

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

Accepted Answer

A)  Never triggers gain recognition. 
B)  Always triggers a gain to be recognized. 
C)  Is treated as boot and may trigger gain recognition. 
D)  Does not affect the like-kind exchange in any way. 
A)  Never triggers gain recognition. 
B)  Always triggers a gain to be recognized. 
C)  Is treated as boot and may trigger gain recognition. 
D)  Does not affect the like-kind exchange in any way.

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

The ownership test for the sale of a personal residence states:

Accepted Answer

A)  That a taxpayer must have owned the home for at least two years. 
B)  That a taxpayer must have lived in the home for at least two years. 
C)  That a taxpayer be the original owner of the residence. 
D)  None of these. 
A)  That a taxpayer must have owned the home for at least two years. 
B)  That a taxpayer must have lived in the home for at least two years. 
C)  That a taxpayer be the original owner of the residence. 
D)  None of these.

Question 18

Related parties include the taxpayer's spouse,ancestors,lineal descendants,but not brothers and sisters.

Accepted Answer

A) True 
 B)False

Question 19

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.

Accepted Answer

A) True 
 B)False

Question 20

Dr.and Mrs.Spankle purchased a residence on January 12,2010,for $250,000.On May 15,2014,they sold the residence for $360,000,and paid selling expenses of $18,000.They purchased a new home for $354,000.Determine the Spankles' realized and recognized gain.

Accepted Answer

$92,000 re

The time period to replace property destroyed in an involuntary conversion is two years from the event.

Raymond and Susan are married and 55 years old.They sell their personal residence for $850,000 cash.They purchased the house fifteen years ago for $200,000.What is the amount of gain that Raymond and Susan should recognize on the sale?

No deduction is allowed with respect to any loss from the sale or exchange of property,directly or indirectly,between related parties.

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

The contract price in an installment sale is:

A wash sale occurs when a taxpayer sells stock or securities at a loss and,within a period of 60 days before or 60 days after the sale,the taxpayer acquires substantially identical stock or securities.

Raymond exchanges a rental lake house with an adjusted basis of $200,000 and fair market value of $320,000 for a rental beach house with a fair market value of $290,000 and $30,000 cash.What are the recognized gain or loss and the basis of the beach house?

To qualify for the IRC Section 121 exclusion of gain on the sale of a residence,the taxpayer must have lived in the home for a continuous two-year period.

Laverne exchanges a rental beach house with an adjusted basis of $400,000 and fair market value of $320,000 for a mini-storage building with a fair market value of $200,000 plus $120,000 cash.What is the recognized gain or loss on the exchange and the basis of the mini-storage building?

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

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

The ownership test for the sale of a personal residence states:

Related parties include the taxpayer's spouse,ancestors,lineal descendants,but not brothers and sisters.

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.

Dr.and Mrs.Spankle purchased a residence on January 12,2010,for $250,000.On May 15,2014,they sold the residence for $360,000,and paid selling expenses of $18,000.They purchased a new home for $354,000.Determine the Spankles' realized and recognized gain.

Introduction to Taxation, the Income Tax Formula, and Form 1040ez

Expanded Tax Formula, Forms 1040a and 1040, and Basic Concepts

Gross Income: Inclusions and Exclusions

Adjustments for Adjusted Gross Income

Itemized Deductions

Self-Employed Business Income

Capital Gains and Other Sales of Property

Rental Property, Royalties, and Income From Flow-Through Entities

Tax Credits

Payroll Taxes

Retirement and Other Tax-Deferred Plans and Annuities

At-Riskpassive Activity Loss Rules and the Individual Alternative Minimum Tax

Partnership Taxation

Corporate Taxation

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Exam 12: Special Property Transactions

The time period to replace property destroyed in an involuntary conversion is two years from the event.

Raymond and Susan are married and 55 years old.They sell their personal residence for $850,000 cash.They purchased the house fifteen years ago for $200,000.What is the amount of gain that Raymond and Susan should recognize on the sale?

No deduction is allowed with respect to any loss from the sale or exchange of property,directly or indirectly,between related parties.

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

The contract price in an installment sale is:

A wash sale occurs when a taxpayer sells stock or securities at a loss and,within a period of 60 days before or 60 days after the sale,the taxpayer acquires substantially identical stock or securities.

Raymond exchanges a rental lake house with an adjusted basis of $200,000 and fair market value of $320,000 for a rental beach house with a fair market value of $290,000 and $30,000 cash.What are the recognized gain or loss and the basis of the beach house?

To qualify for the IRC Section 121 exclusion of gain on the sale of a residence,the taxpayer must have lived in the home for a continuous two-year period.

Laverne exchanges a rental beach house with an adjusted basis of $400,000 and fair market value of $320,000 for a mini-storage building with a fair market value of $200,000 plus $120,000 cash.What is the recognized gain or loss on the exchange and the basis of the mini-storage building?

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

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

The ownership test for the sale of a personal residence states:

Related parties include the taxpayer's spouse,ancestors,lineal descendants,but not brothers and sisters.

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.

Dr.and Mrs.Spankle purchased a residence on January 12,2010,for $250,000.On May 15,2014,they sold the residence for $360,000,and paid selling expenses of $18,000.They purchased a new home for $354,000.Determine the Spankles' realized and recognized gain.

Introduction to Taxation, the Income Tax Formula, and Form 1040ez

Expanded Tax Formula, Forms 1040a and 1040, and Basic Concepts

Gross Income: Inclusions and Exclusions

Adjustments for Adjusted Gross Income

Itemized Deductions

Self-Employed Business Income

Capital Gains and Other Sales of Property

Rental Property, Royalties, and Income From Flow-Through Entities

Tax Credits

Payroll Taxes

Retirement and Other Tax-Deferred Plans and Annuities

At-Riskpassive Activity Loss Rules and the Individual Alternative Minimum Tax

Partnership Taxation

Corporate Taxation

Filters