Exam 12: Property Transactions: Nontaxable Exchanges

Which of the following statements is false regarding involuntary conversions?

Nicki is single and 46 years old.She sells her principal residence (adjusted basis $200,000) that she purchased ten years ago for $435,000. a.What is the amount of Nicki's recognized gain on the sale? b.Assume instead that Nicki sells the residence for $485,000.What is the amount of Nicki's recognized gain on the sale? c.Assume instead that Nicki has been married to Mike for the entire time they have owned and lived in the home.If they sell the home for $485,000,what is the amount of their recognized gain on the sale?

Kuda owns a parcel of land she acquired on June 1,2012,as an investment.She exchanges the land on July 5,2017,for a storage building to be used in her business and marketable securities to be held as an investment.The marketable securities' holding period begins on

A taxpayer sells her principal residence of five years and qualifies to exclude her full $100,000 gain.The taxpayer must report this excluded gain on her tax return for the year of sale.

Jenna,who is single,sold her principal residence on December 1,2016,and excluded the $150,000 gain because she met the ownership and usage requirements under Sec.121.Jenna purchased another residence in Pensacola on January 1,2017,that she occupied until July 1,2017,when she received a new job offer from an employer in Miami.She sells the Pensacola residence on October 1,2017,and realizes a gain of $40,000.Jenna may exclude what amount of the gain from the sale on October 1,2017?

In order to fully defer the gain realized on the involuntary conversion of property,the taxpayer must acquire qualifying replacement property costing at least as much as the cost of the original property.

In 1997,Paige paid $200,000 to purchase a new residence.She paid a realtor $5,000 to help locate the house and paid legal fees of $3,000 to make certain that the seller had legal title to the property.Under the provisions of tax law in effect at the time of the purchase,she deferred a gain of $30,000 from the sale of a former residence in 1996.In 1999,she added a new porch to the house at a cost of $15,000 and installed central air conditioning at a cost of $12,000.Since purchasing the house,she has paid $2,000 in repairs.What is the adjusted basis of the home?

Which of the following statements is false with regard to the ownership and use tests under Sec.121?

If there is a like-kind exchange of property between related parties,how long do they have to wait to dispose of the property received in order to avoid having to recognize any gain on the exchange?

Kuda owns a parcel of land she acquired on June 1,2012,as an investment.She exchanges the land on July 5,2017,for a storage building to be used in her business and marketable securities to be held as an investment.On what date does the storage building's holding period begin?

Amber receives a residence ($750,000 FMV,$500,000 adjusted basis) owned for eight years by Jonathan,her former spouse,as part of a divorce settlement.Amber and Jonathan had lived in the home for the four years before the divorce.Seven months after the transfer of the residence,Amber sells it for $790,000.What is the amount of Amber's recognized gain on the sale of the home?

In the case of married taxpayers,an individual may claim the Sec.121 exclusion even if the individual's spouse used the exclusion within the past two years.

Ron's building,which was used in his business,was destroyed in a fire.Ron's adjusted basis in the building was $210,000,and its FMV was $330,000.Ron filed an insurance claim and was reimbursed $300,000.In that same year,Ron invested $240,000 of the insurance proceeds in another business building.Ron will recognize gain of

Under what circumstances can a taxpayer obtain a partial exclusion if a home is sold before the use and ownership tests are satisfied?

Real property exchanged for personal property,both held for productive use in a business,qualifies as a like-kind exchange.

If real property used in a trade or business or held for investment is condemned,it must be replaced with property having a similar functional use.

When the cost of replacement property is less than the amount realized on an involuntary conversion,gain will be recognized.The recognized gain will be equal to the amount realized over the cost of the replacement property,but not more than the total realized gain.

The exchange of antiques held for investment purposes for stock in an antiques auction house held as an investment qualifies for like-kind treatment.

Whitney exchanges timberland held as an investment for undeveloped land with a $300,000 FMV.Whitney's basis for the timberland is $150,000.She also transfers her tractor with a $15,000 basis and a $10,000 FMV as part of the exchange. a.What is the amount,if any,of gain or loss recognized on the transaction? b.What is the basis of the undeveloped land?

Olivia exchanges land with a $50,000 basis plus marketable securities with a $20,000 basis for a larger parcel of land worth $110,000 in a transaction that otherwise qualifies as a like-kind exchange.The FMV of the land and marketable securities exchanged by Olivia is $75,000 and $35,000 respectively. a.What is the amount of gain realized and recognized by Olivia on each asset? b.What is the amount of Olivia's basis in the new land?