Exam 13: Property Transactions: Determination of Gain or Loss, basis Considerations, and Nontaxable Exchanges

Bud exchanges a business use machine with an adjusted basis of $22,000 and a fair market value of $30,000 for another business use machine with a fair market value of $28,000 and $2,000 cash.What is Bud's recognized gain or loss?

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

Define a bargain purchase of property and discuss the related tax consequences.

Libby's principal residence is destroyed by a tornado.She is single and her realized gain is $360,000.Is it possible for Libby's recognized gain to be $0?

Which of the following is correct?

Karen purchased 100 shares of Gold Corporation stock for $11,500 on January 1,2014.In the current tax year (2017),she sells 25 shares of the 100 shares purchased on January 1,2014,for $2,500.Twenty-five days earlier,she had purchased 30 shares for $3,000.What is Karen's recognized gain or loss on the sale of the stock,and what is her basis in the 30 shares purchased 25 days earlier?

​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?

Gift property (disregarding any adjustment for gift tax paid by the donor):

Define fair market value as it relates to property transactions.

If a taxpayer purchases taxable bonds at a premium,the amortization of the premium is elective.However,if a taxpayer purchases tax-exempt bonds at a premium,the amortization of the premium is mandatory.Explain this difference in the treatment.

If the taxpayer qualifies under § 1033 (nonrecognition of gain from an involuntary conversion),makes the appropriate election,and the amount reinvested in replacement property is less than the amount realized,realized gain is:

Milt's building which houses his retail sporting goods store is destroyed by a flood.Sandra's warehouse which she is leasing to Milt to store the inventory of his business also is destroyed in the same flood.Both Milt and Sandra receive insurance proceeds that result in a realized gain.Sandra will have less flexibility than Milt in the type of building in which she can invest the proceeds and qualify for postponement treatment under § 1033 (nonrecognition of gain from an involuntary conversion).

Yolanda buys a house in the mountains for $450,000 which she uses as her personal vacation home.She builds an additional room on the house for $40,000.She sells the property for $560,000 and pays $28,000 in commissions and $4,000 in legal fees in connection with the sale.What is the recognized gain or loss on the sale of the house?

Nancy gives her niece a crane to use in her business with a fair market value of $61,000 and a basis in Nancy's hands of $80,000.No gift tax was paid.What is the niece's basis for depreciation (cost recovery)?

In October 2017,Ben and Jerry exchange investment realty in a § 1031 like-kind exchange.Ben bought his real estate in 2006 while Jerry purchased his in 2009.In addition to the realty,Ben receives Pearl,Inc.stock worth $10,000 from Jerry.Ben's realized gain is $30,000.On what date does the holding period for Ben's realty received from Jerry begin? When does the holding period for the stock he receives begin?

Liz,age 55,sells her principal residence for $600,000.She purchased it twenty-two years ago for $175,000.Selling expenses are $30,000 and repair expenses to get the house in a marketable condition to sell are $15,000.Liz's objective is to minimize the taxes she must pay associated with the sale.Calculate her recognized gain.

Which of the following statements is correct?

The carryover basis to a donee for property received by gift can be an amount greater than the donor's adjusted basis.

Stuart owns land with an adjusted basis of $190,000 and a fair market value of $500,000.If the property is going to be given to Stuart's nephew,Alex,it is preferable for the transfer to be by inheritance rather than by gift.

When boot in the form of cash is given in a like-kind exchange,recognized gain is the greater of the boot or the realized gain.