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

Noelle received dining room furniture as a gift from her friend, Jane. Jane's adjusted basis was $9,200 and the fair market value on the date of the gift was $7,000. Noelle decided she did not need the furniture and sold it to a neighbor six months later for $6,500. What is her recognized gain or loss?

The nonrecognition of gains and losses under § 1031 is mandatory for gains and elective for losses.

The basis of property acquired in a bargain purchase is the cost of the asset. The bargain amount (fair market value - cost) is recognized when the asset is sold.

Which of the following is correct?

In order to qualify for like-kind exchange treatment under § 1031, which of the following requirements must be satisfied?

In determining the basis of like-kind property received, postponed losses are:

Which of the following exchanges qualifies for nonrecognition treatment as a § 1031 like-kind exchange?

Section 1033 (nonrecognition of gain from an involuntary conversion) applies to both gains and losses.

Lenny and Beverly have been married and living together in Lenny's home for 6 years.He lived in the home alone for 20 years prior to their marriage.They sell the home, which has an adjusted basis of $120,000, for $700,000.Lenny and Beverly plan to use the § 121 exclusion (exclusion of gain on sale of principal residence).In Beverly's prior marriage to Dan, Dan sold his principal residence and used the § 121 exclusion.Beverly and Dan filed joint returns during their seven years of marriage.They had lived in Dan's house throughout their marriage.Dan's sale had occurred one year prior to the divorce.Lenny and Beverly purchase a replacement residence for $650,000 one month after the sale.What is the recognized gain and basis for the new home?

Alvin is employed by an automobile dealership as its manager.As such, he purchased an SUV for $32,000 (fair market value is $48,000).No other employees are permitted a discount.What is Alvin's basis in the SUV?

A building located in Virginia (used in business) exchanged for a building located in France (used in business) cannot qualify for like-kind exchange treatment.

Melba gives her niece a drill press to use in her business with a fair market value of $36,000 and a basis in Melba's hands of $41,000.No gift tax was paid.What is the niece's basis for depreciation (cost recovery)?

Rob was given a residence in 2012.At the time of the gift, the residence had a fair market value of $200,000, and its adjusted basis to the donor was $140,000.The donor paid a gift tax of $10,000 on the taxable gift of $187,000.What is Rob's basis for gain?

Carl sells his principal residence, which has an adjusted basis of $150,000 for $200,000.He incurs selling expenses of $20,000 and legal fees of $2,000.He had purchased another residence one month prior to the sale for $380,000.What is the recognized gain or loss and the basis of the replacement residence if the taxpayer elects to forgo the § 121 exclusion (exclusion of gain on sale of principal residence)?

On the sale of property between related parties, realized gains are recognized whereas realized losses are disallowed.

Capital recoveries include:

In a nontaxable exchange, the replacement property is assigned a carryover basis.

The amount of the loss basis of a gift will differ from the amount of the gain basis only if at the date of the gift the adjusted basis of the property exceeds the property's fair market value.

Fran was transferred from Phoenix to Atlanta.She sold her Phoenix residence (adjusted basis of $250,000) for a realized loss of $50,000 and purchased a new residence in Atlanta for $375,000.Fran had owned and lived in the Phoenix residence for 6 years.What is Fran's recognized gain or loss on the sale of the Phoenix residence and her basis for the residence in Atlanta?

Sonny exchanges a productive use machine (adjusted basis of $20,000) for a new machine worth $18,000.In addition, he receives cash of $6,000.What is the recognized gain or loss and the basis of the new machine?