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

Joseph converts a building (adjusted basis of $50,000 and fair market value of $40,000) from personal use to business use.Justin receives a building with a $40,000 fair market value ($50,000 donor's adjusted basis) from his mother as a gift.Discuss the tax consequences with respect to Joseph's and Justin's adjusted basis.

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.

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

Wyatt sells his principal residence in December 2017 and qualifies for the § 121 exclusion.He sells another principal residence in November 2018.Under no circumstance can Wyatt qualify for the § 121 exclusion on the sale of the second residence.

If insurance proceeds are received for property used in a trade or business,a casualty transaction can result in recognized gain,but cannot result in a recognized loss.

The holding period for nontaxable stock dividends that are the same type (i.e.,common on common) includes the holding period of the original shares,but the holding period for nontaxable stock dividends that are not the same type (i.e.,preferred on common) is new and begins on the date the dividend is received.

Sidney,a calendar year taxpayer,owns a building (adjusted basis $450,000) in Columbus,OH,in which he conducts his retail computer sales business.The building is destroyed by fire on December 12,2017,and two weeks later he receives insurance proceeds of $600,000.Due to family ties,Sidney decides to move to Columbia,SC.He reinvests all of the insurance proceeds in a building in Columbia where he opens a retail computer sales business on April 2,2018.By electing § 1033,Sidney has no recognized gain and a basis in the new building of $450,000 ($600,000 cost - $150,000 postponed gain).

Pedro borrowed $250,000 to purchase a machine costing $300,000.He later borrowed an additional $25,000 using the machine as collateral.Both notes are nonrecourse.Eight years later,the machine has an adjusted basis of zero and two outstanding note balances of $145,000 and $18,000.Pedro sells the machine subject to the two liabilities for $45,000.What is his realized gain or loss?

Boyd acquired tax-exempt bonds for $430,000 in December 2017.The bonds,which mature in December 2022,have a maturity value of $400,000.Boyd does not make any elections regarding the amortization of the bond premium.Determine the tax consequences to Boyd when he redeems the bonds in December 2022.

In computing the amount realized when the fair market value of the property received cannot be determined,the fair market value of the property surrendered may be used.

Brett owns investment land located in Tucson,Arizona.He exchanges it for other investment land.In which of the following locations may the other investment land be located and enable Brett to qualify for § 1031 like-kind exchange treatment?

Emma gives her personal use automobile (cost of $32,000; fair market value of $12,000) to her son,Louis,on July 3,2017.She has owned the automobile since July 1,2014. a.What is Louis' basis for the car? b.When does his holding period begin?

​Milton owns a bond (face value of $25,000) for which he paid $28,000.Which of the following statements is correct?

Maurice sells his personal use automobile at a realized loss.Under what circumstances can Maurice deduct the loss? What if the personal use asset was sold at a realized gain?

In 2013,Harold purchased a classic car that he planned to restore for $12,000.However,Harold is too busy to work on the car and he gives it to his daughter Julia in 2017.At this time,the fair market value of the car has declined to $10,000.Harold paid no gift tax on the transaction.Julia completes some of the restoration herself with out-of-pocket costs of $5,000.She later sells the car for $30,000.What is Julia's recognized gain or loss on the sale of the car?

Sammy exchanges equipment used in his business in a like-kind exchange.The property exchanged is as follows: The other party assumes the liability. a.​What is Sammy's recognized gain or loss? b.What is Sammy's basis for the assets he received?

The taxpayer owns stock with an adjusted basis of $15,000 and a fair market value of $8,000.If the stock or cash is going to be given to her niece,it is preferable for the taxpayer to sell the stock and give the $8,000 of cash to her niece.The same preference would exist if the recipient were a qualified charitable organization.

Albert purchased a tract of land for $140,000 in 2014 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 2017 and the value of the land fell to $100,000.What is the amount of loss Albert can claim in 2017?

If property that has been converted from personal use to business use has appreciated in value,its basis for gain will be the same as the basis for loss.

On February 1,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: