Exam 12: Property Transactions: Nontaxable Exchanges

The $250,000/$500,000 exclusion for gain on the sale of a personal residence is only available to taxpayers who are age 55 or older.

Stephanie's building,which was used in her business,was destroyed in a fire.Stephanie's adjusted basis in the building was $175,000,and its FMV was $210,000.Stephanie filed an insurance claim and was reimbursed $200,000.In that same year,Stephanie invested $180,000 of the insurance proceeds in another business building.If the proper election is made,Stephanie will recognize gain of

Eric exchanges a printing press with an adjusted basis of $64,000 for a smaller model with a $100,000 fair market value.In addition,he receives $20,000 of marketable securities. a.What is the amount of gain realized by Eric? b.What is the amount of gain recognized by Eric? c.What is Eric's basis in the new printing press? d.What is Eric's basis in the marketable securities?

Kareem's office building is destroyed by fire on April 11,2017.Settlement is reached with the insurance company on November 1,2017 when he receives a check for $900,000.The property had recently been appraised for $920,000.Kareem's adjusted basis in the building was $800,000. a.What is Kareem's realized gain or loss? b.Assume Kareem wishes to defer the maximum amount of gain.Indicate: (1) the minimum amount that must be spent on a new property. (2) any restrictions on the new property in order for it to qualify. (3) the deadline for placing the new property in service. c. Assume that instead of a fire,the state forces Kareem to sell the property.Indicate how your responses to part b would differ.

All of the following qualify as a like-kind exchange except

In an involuntary conversion,the basis of replacement property is its cost reduced by the gain deferred.

According to Sec.121,individuals who sell or exchange their personal residence may exclude part or all of the gain if the house was owned and occupied as a principal residence for

Realized gain or loss must be recognized unless a specific Code section provides for nonrecognition treatment.

Ella needs to move her business to a larger facility.She projects a large realized gain on the sale of the old building and prefers not to pay tax on the gain because the sales proceeds are needed to finance the purchase of the new building.In the circumstances,a direct two- or three-party like-kind exchange is not feasible.Ella's sale can still qualify for like-kind treatment if she arranges an appropriate nonsimultaneous exchange.Among other criteria,after the transfer of the old building,the replacement property must be

Discuss the basis rules of property received in a nontaxable like-kind exchange.

Rolf exchanges an office building worth $150,000 for investment land worth $175,000.He also provided stock worth $25,000.Rolf's adjusted basis in the building and stock is $130,000 and $11,000,respectively.How much gain will Rolf recognize on the exchange?

Vector Inc.'s office building burns down on October 31,2016.Vector,a calendar-year taxpayer,finally settles with the insurance company on February 3,2017.In order to defer the gain realized on the building,Vector must acquire another office building by February 3,2019.

On May 1 of this year,Ingrid sold her personal residence for $250,000.Commissions on the sale were $20,000.Ingrid also incurred $10,000 of costs for painting and repairs,which were all completed and paid for two weeks prior to the sale of her home.Ingrid's basis in her old home was $180,000.Ingrid's realized gain upon the sale of her first home is

The building used in Tim's business was condemned by the city of Lafayette.Tim received a condemnation award of $125,000.He paid $1,200 in lawyer's fees and $800 for an appraisal of the property.Tim's adjusted basis in the building was $60,000.Tim reinvests in similar property costing $110,000,and Tim makes the proper election regarding the property.What is the amount of Tim's realized (not recognized) gain on the condemnation?

The building used in Manuel's business was condemned by the city of Mobile.Manuel received a condemnation award of $220,000.He paid $800 in lawyer's fees and $600 for an appraisal of the property.Manuel's adjusted basis in the building was $120,000.Manuel reinvests in similar property costing $200,000,and Manuel makes the proper election regarding the property.Manuel's basis in the new building is

The holding period for boot property received begins on the day after the date of the exchange.

Luke's offshore drilling rig with a $700,000 adjusted basis is destroyed by a hurricane.He collects $620,000 from the insurance company and purchases a new drilling rig for $600,000. a.What are the tax consequences of these transactions? b.What is the basis of the new rig?

If an exchange qualifies as a like-kind exchange,nonrecognition of gain or loss is elective.

Mitchell and Debbie Dixon,a married couple,sell their personal residence to Sophie.Sophie pays $225,000 and assumes their $70,000 mortgage.To make the sale the Dixons pay $4,000 in commissions and $1,000 in legal costs.The couple has owned and lived in the house for seven years and their tax basis is $125,000.What is the amount of gain recognized on the sale?

Yael exchanges an office building worth $150,000 for investment land worth $175,000.Yael also transferred stock worth $25,000 to the other party.Yael's adjusted basis in the building and stock is $180,000 and $11,000,respectively.How much gain or loss will Yael recognize on the exchange?