Question 1

What is the amount of the casualty loss on a business truck that had a fair market value of $14,000 before an accident and $4,000 after an accident, if its adjusted basis is zero?

Accepted Answer

A)   $14,000
B)   $10,000
C)   $4,000
D)   0 D

Question 2

How is the basis of stock received for appreciated property in a Section 351 transfer determined?

Accepted Answer

The basis of stock received for appreciated property in a Section 351 transfer is equal to the basis of the property transferred to the corporation increased by any gain recognized on the transfer and decreased by the fair market value of any boot received.

Question 3

By what mechanism is a deferral of gain normally accomplished?

Accepted Answer

The basis adjustment is the mechanism by which gain or loss is deferred; basis is reduced for a deferred gain and increased for a deferred loss.

Question 4

What is the control requirement to qualify a gain on transfer to a corporation for tax deferral?

Accepted Answer

The answer of What is the control requirement to qualify...

Question 5

The holding period for boot in a like-kind exchange begins on the date of the exchange.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is not a required characteristic of a qualifying Section 351 transaction?

Accepted Answer

A)   If more than 20 percent of the stock is transferred for services, property must also be transferred by the service provider.
B)   Gain may be recognized if the transferor receives something other than stock.
C)   The transferors must control the corporation after the transfer.
D)   Control requires shareholders owning only 80 percent of the voting stock if nonvoting stock is outstanding.

Question 7

Twining Corporation has some land it wants to trade for a building owned by Clopp Corporation. Clopp does not want to exchange the building because it wants to recognize its loss on the building. Twining, however, does not want to recognize its gain. What alternative(s) does Twining have that will allow it to avoid recognizing gain?

Accepted Answer

A)   Twining can sell its land to a third party and take the money and purchase the building.
B)   Twining can have a third party purchase the building and have the third party trade for the land.
C)   Twining can complete a nonsimulataneous exchange within one year of identifying the desired property.
D)   All of the above are acceptable alternatives.

Question 8

Elizabeth exchanges an office building valued at $400,000 with a $75,000 mortgage and adjusted basis of $180,000 for land valued at $275,000. What is Elizabeth's basis in the land received in the exchange?

Accepted Answer

A)   $400,000
B)   $275,000
C)   $180,000
D)   $75,000

Question 9

If a taxpayer's personal residence is involuntarily converted, the taxpayer can only defer gain by acquiring a new residence in the required time period using IRC §1033.

Accepted Answer

A) True 
 B)False

Question 10

Corporation P acquires 95 percent of Corporation T's assets for $19.5 million of P's stock in a qualifying reorganization. The assets transferred have a basis of $14 million. T retained $500,000 of cash to pay its remaining liabilities. It only used $200,000 of the cash and the remaining cash and P stock are distributed to T's shareholder, who has a basis of $14 million in her stock. What is the gain recognized on this reorganization?

Accepted Answer

A)   0
B)   $300,000
C)   $5.5 million
D)   $7.5 million

Question 11

The taxpayer-use test for deferral of gain on an involuntary conversion requires the taxpayer to acquire property that has the same function or use as the involuntarily converted property that he or she used prior to the conversion.

Accepted Answer

A) True 
 B)False

Question 12

Kaitlin purchased 100 shares of Norton Corporation stock for $11,500 on January 1, 2015. March 1, 2018, she purchased 30 additional shares of Norton Corporation for $3,000. On March 20, 2018, she sold 25 shares of the 100 shares she had purchased in 2015, for $2,500. What is Kaitlin's recognized gain or loss on the sale of the stock?

Accepted Answer

A)   $500 recognized loss
B)   $375 recognized loss
C)   $375 recognized gain
D)   $0 recognized gain or loss

Question 13

All of the following are deferral provisions except:

Accepted Answer

A)   Sale of a personal residence
B)   Like-kind exchange
C)   Exchange of a life insurance contract for an annuity contract
D)   Property transfers pursuant to divorce proceedings

Question 14

What effect do liabilities assumed by the partnership have on a partner's basis?

Accepted Answer

The answer of What effect do liabilities assumed by the...

Question 15

Which of the following is not a characteristic of a like-kind exchange?

Accepted Answer

A)   The holding period for like-kind property includes the holding period of the property surrendered.
B)   Receipt of boot can cause gain recognition up to the gain realized.
C)   Business realty can be exchanged for business personalty.
D)   Personal-use assets do not qualify for like-kind exchanges.

Question 16

Conrad corporation's warehouse was destroyed by a hurricane in September 2018. The estimated fair market value before the hurricane was $750,000 and Conrad's adjusted basis in the warehouse was $450,000. Insurance paid $725,000 as a result of this event. Conrad purchased a new Warehouse in December of 2018 for $700,000. What is Conrad's deductible loss or recognized gain?

Accepted Answer

A)   zero deductible loss or recognized gain
B)   $25,000 recognized gain
C)   $450,000 deductible loss
D)   $750,000 deductible loss

Question 17

What is the limit of the gain that can be recognized on a like-kind exchange?

Accepted Answer

The answer of What is the limit of the gain...

Question 18

Dylan, Luke, and Hannah form a partnership. Dylan contributes land with a fair market value of $25,000 (basis of $15,000) in exchange for a 25% interest. Luke contributes equipment with a $35,000 fair market value (basis of $38,000) in exchange for a 35% interest, and Hannah contributes a building with a $100,000 fair market value (basis = $35,000) and a mortgage of $60,000 (assumed by the partnership) in exchange for a 40% interest. How much gain does Hannah recognize?

Accepted Answer

A)   $0
B)   $1,000
C)   $5,000
D)   $65,000

Question 19

Which type of reorganization does not allow the parent corporation to make a qualifying transfer to a subsidiary of the property received in the reorganization?

Accepted Answer

A)   Type A
B)   Type B
C)   Type C
D)   Type D

Question 20

What is a wash sale?

Accepted Answer

The answer of What is a wash sale?...

Exam 9: Tax-Deferred Exchanges

What is the amount of the casualty loss on a business truck that had a fair market value of $14,000 before an accident and $4,000 after an accident, if its adjusted basis is zero?

How is the basis of stock received for appreciated property in a Section 351 transfer determined?

By what mechanism is a deferral of gain normally accomplished?

What is the control requirement to qualify a gain on transfer to a corporation for tax deferral?

The holding period for boot in a like-kind exchange begins on the date of the exchange.

Which of the following is not a required characteristic of a qualifying Section 351 transaction?

Elizabeth exchanges an office building valued at $400,000 with a $75,000 mortgage and adjusted basis of $180,000 for land valued at $275,000. What is Elizabeth's basis in the land received in the exchange?

If a taxpayer's personal residence is involuntarily converted, the taxpayer can only defer gain by acquiring a new residence in the required time period using IRC §1033.

The taxpayer-use test for deferral of gain on an involuntary conversion requires the taxpayer to acquire property that has the same function or use as the involuntarily converted property that he or she used prior to the conversion.

All of the following are deferral provisions except:

What effect do liabilities assumed by the partnership have on a partner's basis?

Which of the following is not a characteristic of a like-kind exchange?

What is the limit of the gain that can be recognized on a like-kind exchange?

Which type of reorganization does not allow the parent corporation to make a qualifying transfer to a subsidiary of the property received in the reorganization?

What is a wash sale?