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

Jared, a fiscal year taxpayer with a September 30th year-end, owns an office building (adjusted basis of $715,000) that was destroyed by fire on September 12, 2012. If the insurance settlement was $950,000 (received March 1, 2013), what is the latest date that Jared can replace the office building in order to qualify for § 1033 nonrecognition of gain?

Albert purchased a tract of land for $140,000 in 2009 when he heard that a new highway was going to be constructed through the property and that the land would soon be worth $200,000.Highway engineers surveyed the property and indicated that he would probably get $180,000.The highway project was abandoned in 2012 and the value of the land fell to $100,000.What is the amount of loss Albert can claim in 2012?

Lynn purchases a house for $52,000.She converts the property to rental property when the fair market value is $115,000.After deducting depreciation (cost recovery) expense of $1,130, she sells the house for $120,000.What is her recognized gain or loss?

Robert and Diane, husband and wife, live in Pennsylvania, a common law state.They purchased land as joint tenants in 2008 for $300,000.In 2012, Diane dies and bequeaths her share of the land to Robert.The land has a fair market value of $450,000.What is Robert's adjusted basis for the land?

The basis of boot received in a like-kind exchange is its fair market value, unless the realized gain is a smaller amount.

Which of the following types of exchanges of insurance contracts qualify for nonrecognition treatment under § 1035?

Which of the following statements correctly reflects the rules regarding inherited property in 2012?

Kitty, who is single, sells her principal residence, which she has owned and occupied for 8 years, for $375,000. The adjusted basis is $64,000, selling expenses are $22,000, and repairs to make the house more marketable are $7,000. Her recognized gain is $32,000.

If the taxpayer qualifies under § 1033 (nonrecognition of gain from an involuntary conversion) and the amount reinvested in replacement property exceeds the amount realized, the basis of the replacement property is:

For the loss disallowance provision under § 267, related parties include certain family members, a shareholder and his or her controlled corporation (i.e., greater than 50% in value of the corporation's outstanding stock), and a partner and his or her controlled partnership (i.e., greater than 50% of the capital interests or profits interest in the partnership).

Ben sells stock (adjusted basis of $25,000) to his son, Ray, for its fair market value of $15,000.Ray gives the stock to his daughter, Trish, who subsequently sells it for $26,000.Ben's recognized loss is $0 and Trish's recognized gain is $1,000 ($26,000 - $15,000 - $10,000).

Purchased goodwill is assigned a basis equal to cost, and developed or self-created goodwill is assigned a basis equal to one-fifteenth of the amount expended.

Terry exchanges real estate (acquired on August 25, 2006) held for investment for other real estate to be held for investment on September 1, 2012.None of the realized gain of $10,000 is recognized, and Terry's adjusted basis for the new real estate is a carryover basis of $80,000.Consequently, Terry's holding period for the new real estate begins on August 25, 2006.

If boot in the form of cash is given in a § 1031 like-kind exchange, the realized gain may be recognized.

Pam exchanges a rental building, which has an adjusted basis of $520,000, for investment land which has a fair market value of $700,000.In addition, Pam receives $100,000 in cash.What is the recognized gain or loss and the basis of the investment land?

To qualify as a like-kind exchange, real property must be exchanged either for other real property or for personal property with a statutory life of at least 39 years.

Expenditures made for ordinary repairs and maintenance of property are not added to the original basis in the determination of the property's adjusted basis whereas capital expenditures are added to the original basis.

An involuntary conversion results from the destruction (complete or partial), theft, seizure, requisition or condemnation, or the sale or exchange under threat or imminence of requisition or condemnation of the taxpayer's property.

Peach, Inc., owns a delivery truck (cost of $35,000) on which depreciation of $21,000 has been deducted.The truck and $14,000 cash are used to acquire a new truck at a cost of $40,000.What is Peach's basis for the new truck?

The basis of property received by gift is always a carryover basis.