Question 1

Which of the following is correct?

Accepted Answer

A)  The gain basis for property received by gift is the lesser of the donor's adjusted basis or the fair market value on the date of the gift. 
B)  The loss basis for property received by gift is the same as the donor's basis. 
C)  The gain basis for inherited property is the same as the decedent's basis. 
D)  The loss basis for inherited property is the lesser of the decedent's basis or the fair market value on the date of the decedent's death. 
E)  None of the above. 
A)  The gain basis for property received by gift is the lesser of the donor's adjusted basis or the fair market value on the date of the gift. 
B)  The loss basis for property received by gift is the same as the donor's basis. 
C)  The gain basis for inherited property is the same as the decedent's basis. 
D)  The loss basis for inherited property is the lesser of the decedent's basis or the fair market value on the date of the decedent's death. 
E)  None of the above.

Question 2

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?

Accepted Answer

Yes, it is possible for the Libby's reco

Question 3

Nat is a salesman for a real estate developer. His employer permits him to purchase a lot for $75,000. The employer's adjusted basis for the lot is $45,000, and its normal selling price is $90,000. What is Nat's recognized gain and his basis for the lot?

Accepted Answer

The answer of Nat is a salesman for a real...

Question 4

Melody's adjusted basis for 10,000 shares of Cardinal, Inc. common stock is $1,000,000. During the year, she receives a 5% stock dividend that is a nontaxable stock dividend.
a. What is the amount of Melody's gross income?
b. What is Melody's total basis for the stock?
c. What is Melody's basis per share?

Accepted Answer

a. Melody has no gross income because th

Question 5

Under what circumstance is there recognition of some or all of the realized gain associated with the giving of boot by the taxpayer in a like-kind exchange?

Accepted Answer

Generally, the giving of boot by the tax

Question 6

Terry exchanges real estate (acquired on August 25, 2012) held for investment for other real estate to be held for investment on September 1, 2018. 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, 2012.

Accepted Answer

A) True 
 B)False

Question 7

Define fair market value as it relates to property transactions.

Accepted Answer

The fair market value of property receiv

Question 8

During 2018, Howard and Mabel, a married couple, decided to sell their residence. The residence has a basis of $162,000 and has been owned and occupied by them for 11 years. The house was sold in May for $395,000 with broker's commissions and other selling expenses being $24,000. They purchased a new residence in June for $400,000. What is the adjusted basis of the new residence?

Accepted Answer

A)  $0 
B)  $141,000 
C)  $162,000 
D)  $191,000 
E)  None of the above 
A)  $0 
B)  $141,000 
C)  $162,000 
D)  $191,000 
E)  None of the above

Question 9

In October 2018, Ben and Jerry exchange investment realty in a § 1031 like-kind exchange. Ben bought his real estate in 2007 while Jerry purchased his in 2010. 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?

Accepted Answer

A)  2007, 2018. 
B)  2007, 2007. 
C)  2010, 2010. 
D)  2010, 2018. 
E)  None of the above. 
A)  2007, 2018. 
B)  2007, 2007. 
C)  2010, 2010. 
D)  2010, 2018. 
E)  None of the above.

Question 10

Under the Internal Revenue Code, the holding period for property acquired by inheritance is always:

Accepted Answer

A)  Long-term. 
B)  Short-term. 
C)  Determined by the date acquired by the individual who died. 
D)  Determined by the date of death. 
E)  None of the above. 
A)  Long-term. 
B)  Short-term. 
C)  Determined by the date acquired by the individual who died. 
D)  Determined by the date of death. 
E)  None of the above.

Question 11

Moss exchanges a warehouse for a building he will use as an office building. The adjusted basis of the warehouse is $600,000 and the fair market value of the office building is $350,000. In addition, Moss receives cash of $150,000. What is the recognized gain or loss and the basis of the office building?

Accepted Answer

A)  $0 and $350,000. 
B)  $0 and $450,000. 
C)  ($150,000) and $300,000. 
D)  ($200,000) and $350,000. 
E)  None of the above. 
A)  $0 and $350,000. 
B)  $0 and $450,000. 
C)  ($150,000) and $300,000. 
D)  ($200,000) and $350,000. 
E)  None of the above.

Question 12

If the recognized gain on an involuntary conversion equals the realized gain because of a reinvestment deficiency, the basis of the replacement property will be more than its cost (cost plus realized gain).

Accepted Answer

A) True 
 B)False

Question 13

Jacob owns land with an adjusted basis of $140,000 and a fair market value of $115,000. Determine the amount of realized and recognized gain or loss to the seller and the adjusted basis for the buyer for each of the following.
a. Jacob sells the land for $115,000 to a corporation in which he owns 60% of the stock.
b. Jacob sells the land for $115,000 to a partnership in which he has a capital and profits interest of 60%.

Accepted Answer

The answer of Jacob owns land with an adjusted basis...

Question 14

What effect does a deductible casualty loss have on the adjusted basis of property?

Accepted Answer

A deductible casualt

Question 15

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

Accepted Answer

A)  The form of the transaction is a sale or exchange. 
B)  Both the property transferred and the property received are held either for productive use in a trade or business or for investment. 
C)  The exchange must be completed by the end of the second tax year following the tax year in which the taxpayer relinquishes his or her like-kind property. 
D)  Only a. and b. 
E)  a., b., and c. 
A)  The form of the transaction is a sale or exchange. 
B)  Both the property transferred and the property received are held either for productive use in a trade or business or for investment. 
C)  The exchange must be completed by the end of the second tax year following the tax year in which the taxpayer relinquishes his or her like-kind property. 
D)  Only a. and b. 
E)  a., b., and c.

Question 16

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)?

Accepted Answer

A)  $0 and $380,000. 
B)  $0 and $408,000. 
C)  $28,000 and $352,000. 
D)  $28,000 and $380,000. 
E)  None of the above. 
A)  $0 and $380,000. 
B)  $0 and $408,000. 
C)  $28,000 and $352,000. 
D)  $28,000 and $380,000. 
E)  None of the above.

Question 17

Leonore exchanges 5,000 shares of Pelican, Inc., stock for 2,000 shares of Blue Heron, Inc., stock. Leonore's adjusted basis for the Pelican stock is $300,000 and the fair market value of the Blue Heron stock is $350,000. Leonore's recognized gain is $0 and her adjusted basis for the Blue Heron stock is $300,000.

Accepted Answer

A) True 
 B)False

Question 18

The amount realized does not include any amount received by the taxpayer that is designated as severance damages by both the government and the taxpayer.

Accepted Answer

A) True 
 B)False

Question 19

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?

Accepted Answer

A)  $0 and $420,000. 
B)  $100,000 and $420,000. 
C)  $100,000 and $520,000. 
D)  $280,000 and $700,000. 
E)  None of the above. 
A)  $0 and $420,000. 
B)  $100,000 and $420,000. 
C)  $100,000 and $520,000. 
D)  $280,000 and $700,000. 
E)  None of the above.

Question 20

The adjusted basis of an asset is the original cost (or basis) plus capital recoveries less capital additions.

Accepted Answer

A) True 
 B)False

Which of the following is correct?

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?

Nat is a salesman for a real estate developer. His employer permits him to purchase a lot for $75,000. The employer's adjusted basis for the lot is $45,000, and its normal selling price is $90,000. What is Nat's recognized gain and his basis for the lot?

Under what circumstance is there recognition of some or all of the realized gain associated with the giving of boot by the taxpayer in a like-kind exchange?

Define fair market value as it relates to property transactions.

Under the Internal Revenue Code, the holding period for property acquired by inheritance is always:

If the recognized gain on an involuntary conversion equals the realized gain because of a reinvestment deficiency, the basis of the replacement property will be more than its cost (cost plus realized gain).

What effect does a deductible casualty loss have on the adjusted basis of property?

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

The amount realized does not include any amount received by the taxpayer that is designated as severance damages by both the government and the taxpayer.

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?

The adjusted basis of an asset is the original cost (or basis) plus capital recoveries less capital additions.

An Introduction to Taxation and Understanding the Federal Tax Law

Working with the Tax Law

Computing the Tax

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: In General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, Cost Recovery, Amortization, and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payments

Property Transactions: Capital Gains and Losses, Section 1231, and Recapture Provisions

Taxing Business Income

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Corporations: Distributions in Complete Liquidation and an Overview of Reorganizations

Partnerships

S Corporations

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Income Taxation of Trusts and Estates

Filters

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

Which of the following is correct?

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?

Nat is a salesman for a real estate developer. His employer permits him to purchase a lot for $75,000. The employer's adjusted basis for the lot is $45,000, and its normal selling price is $90,000. What is Nat's recognized gain and his basis for the lot?

Under what circumstance is there recognition of some or all of the realized gain associated with the giving of boot by the taxpayer in a like-kind exchange?

Define fair market value as it relates to property transactions.

Under the Internal Revenue Code, the holding period for property acquired by inheritance is always:

If the recognized gain on an involuntary conversion equals the realized gain because of a reinvestment deficiency, the basis of the replacement property will be more than its cost (cost plus realized gain).

What effect does a deductible casualty loss have on the adjusted basis of property?

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

The amount realized does not include any amount received by the taxpayer that is designated as severance damages by both the government and the taxpayer.

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?

The adjusted basis of an asset is the original cost (or basis) plus capital recoveries less capital additions.

An Introduction to Taxation and Understanding the Federal Tax Law

Working with the Tax Law

Computing the Tax

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: In General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, Cost Recovery, Amortization, and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payments

Property Transactions: Capital Gains and Losses, Section 1231, and Recapture Provisions

Taxing Business Income

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Corporations: Distributions in Complete Liquidation and an Overview of Reorganizations

Partnerships

S Corporations

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Income Taxation of Trusts and Estates

Filters