Exam 13: A: Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges-Part 1

The nonrecognition treatment on realized gains of an indirect involuntary conversion of a factory building under § 1033 is elective, while a like-kind exchange of computers under § 1031 is mandatory.

Gene purchased an SUV for $42,000 which he uses 100% for personal purposes.When the SUV is worth $29,000, he contributes it to his business.The gain basis is $42,000, the loss basis is $29,000, and the basis for cost recovery is $29,000.

Nontaxable stock dividends result in no change to the total basis of the old and new stock, but the basis per share decreases.

A taxpayer whose principal residence is destroyed in a fire can use both the § 121 (sale of residence gain exclusion) and the § 1033 (involuntary conversion postponement of gain) provisions.

The amount received for a utility easement on land is included in the gross income of the taxpayer.

The holding period of nontaxable stock rights includes the holding period of the stock on which the rights were distributed.

Ross lives in a house he received as a gift from his father.His father had lived in the house for 12 years.The adjusted basis of the house to his father was $160,000 and the fair market value at the time of the gift was $140,000.Ross sells this residence after living in it for 18 months for $150,000 and purchases a new home for $125,000.He incurs selling expenses of $7,000.What is Ross' recognized gain or loss and basis for the new residence?

Nontaxable stock dividends result in:

Kelly inherits land which had a basis to the decedent of $95,000 and a fair market value of $50,000 on August 4, 2012, the date of the decedent's death.The executor distributes the land to Kelly on November 12, 2012, at which time the fair market value is $49,000.The fair market value on February 4, 2013, is $45,000.In filing the estate tax return, the executor elects the alternate valuation date.Kelly sells the land on June 10, 2013, for $48,000.What is her recognized gain or loss?

The holding period of property acquired by gift may begin on:

If a taxpayer reinvests the net proceeds (amount received - related expenses) received in an involuntary conversion in qualifying replacement property within the statutory time period, it is possible to defer the recognition of the realized gain.

The maximum amount of the § 121 gain exclusion on sale of a principal residence is $250,000 for a single individual and $500,000 for a married couple.

Mona purchased a business from Judah for $1,000,000. Judah's records and an appraiser provided her with the following information regarding the assets purchased: What is Mona's adjusted basis for the land, building, and equipment?

Parker bought a brand new Ferrari on January 1, 2012, for $125,000. Parker was fatally injured in an auto accident on June 23, 2012, when the fair market value of the car was $105,000. Parker was driving a loaner car from the Ferrari dealership while his car was being serviced. In his will, Parker left the Ferrari to his best friend, Ryan. Ryan's holding period for the Ferrari begins on June 23, 2012.

Which of the following types of transactions qualify for nonrecognition treatment?

Melvin receives stock as a gift from his uncle.No gift tax is paid.The adjusted basis of the stock is $30,000 and the fair market value is $38,000.Melvin trades the stock for bonds with a fair market value of $35,000 and $3,000 cash.What is his recognized gain and the basis for the bonds?

Jena owns land as an investor.She exchanges the land for a warehouse in which she will store the inventory of her business.The exchange doesqualify for like-kind exchange treatment.

On February 2, 2012, Karin purchases real estate for $375,000.The annual property taxes of $5,000 are payable on December 31.Realizing that she will pay the property taxes for the entire year, Karin remits $374,575 to the seller at closing.Karin's adjusted basis for the real estate is:

Karen owns City of Richmond bonds with a face value of $10,000.She purchased the bonds on January 1, 2012, for $11,000.The maturity date is December 31, 2021.The annual interest rate is 8%.What is the amount of taxable interest income that Karen should report for 2012, and the adjusted basis for the bonds at the end of 2012, assuming straight-line amortization is appropriate?

Elvis owns all of the stock of Shadow Corporation.The accumulated earnings and profits of Shadow Corporation at the end of the year are a deficit of $12,000.The current earnings and profits are $25,000.Elvis' basis for his stock is $290,000.He receives a distribution of $340,000 on the last day of the tax year.How much dividend income and/or capital gain should Elvis report?