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

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Question 91

True/False

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Monroe's delivery truck is damaged in an accident.Monroe's adjusted basis for the delivery truck prior to the accident is $20,000.If Monroe receives insurance proceeds of $21,000 and recognizes a casualty gain of $1,000, his adjusted basis for the delivery truck after the accident is $21,000.

A) True
B) False

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Question 92

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If a taxpayer exchanges like-kind property under § 1031 and assumes a liability associated with the property received, the taxpayer is considered to have given boot in the transaction.

A) True
B) False

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Question 93

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In addition to other gifts, Megan made a gift of stock to Jeri in 1975.Megan had purchased the stock in 1973 for $7,500.At the time of the gift, the stock was worth $20,000.If Megan paid $850 of gift tax on the transaction in 1975, what is Jeri's gain basis for the stock?

Noelle owns an automobile which she uses for personal use.Her adjusted basis is $45,000 (i.e., the original cost) .The car is worth $22,000.Which of the following statements is correct?

Leta has a fiscal tax year which ends on June 30th. Her factory building is destroyed by a fire on October 12, 2012. Two months later, she receives insurance proceeds large enough to produce a realized gain. In order to elect § 1033 postponement, Leta must acquire qualified replacement property by December 31, 2014.

Jesse purchases land and an office building for his business for $200,000 with $50,000 being allocated to the land.During the first year, Jesse deducts cost recovery of $3,050.Jesse's adjusted basis for the building at the end of the first year is $146,950 ($150,000 - $3,050).

Which of the following satisfy the time period requirement for postponement of gain as a § 1033 (nonrecognition of gain from an involuntary conversion) involuntary conversion?

The basis of property acquired in a wash sale is its cost plus the loss recognized on the wash sale.

During 2012, Zeke and Alice, a married couple, decided to sell their residence, which had a basis of $200,000.They had owned and occupied the residence for 20 years.To make it more attractive to prospective buyers, they had the inside painted in April at a cost of $5,000 and paid for the work immediately.They sold the house in May for $800,000.Broker's commissions and other selling expenses amounted to $50,000.They purchased a new residence in July for $400,000.What is the recognized gain and the adjusted basis of the new residence?

Matt, who is single, sells his principal residence, which he has owned and occupied for 5 years, for $435,000. The adjusted basis is $140,000 and the selling expenses are $20,000. Three days after the sale he purchases another residence for $385,000. Matt's recognized gain is $25,000 and his basis for the new residence is $385,000.

Pierce exchanges an asset (adjusted basis of $14,000; fair market value of $18,000) for another asset (fair market value of $15,000).In addition, he receives cash of $3,000.If the exchange qualifies as a like-kind exchange, his recognized gain is $3,000 and his adjusted basis for the property received is $17,000 ($14,000 + $3,000 recognized gain).

Deidra has owned and occupied her principal residence for 10 years.Two and one-half years ago she married Doug who moved into her house.Doug has never owned a home.When Deidra is transferred to another city, she sells the house and has a realized gain of $425,000.Deidra can exclude the realized gain from her gross income under § 121 if she and Doug file a joint return.

As part of the divorce agreement, Hugh transfers his ownership interest in their personal residence to Monica.The house had been jointly owned by Hugh and Monica and the adjusted basis is $590,000.At the time of the transfer to Monica, the fair market value is $900,000.What is the recognized gain to Hugh, and what is Monica's basis for the house?

The exchange of unimproved real property located in Topeka (KS) for improved real property located in Atlanta (GA) does not qualify as a like-kind exchange.

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?

Betty owns a horse farm with 500 acres of land (adjusted basis of $600,000) .Fifty acres of the land are condemned by the state for $400,000 in order to build a municipal stadium.Since the fair market value of Betty's farm is significantly decreased by the proximity to the future stadium, the state awards Betty $300,000 in severance damages.Betty does not use the $300,000 to restore the usefulness of the farm and all of the $700,000 ($400,000 + $300,000) proceeds are invested in the stock market.What is her recognized gain or loss associated with the receipt of the severance damages?

If the buyer assumes the seller's liability on the property acquired, the seller's amount realized is decreased by the amount of the liability assumed.

If the fair market value of the property on the date of death is greater than on the alternate valuation date, the use of the alternate valuation amount is mandatory.

If Wal-Mart stock increases in value during the tax year by $4,500, the amount realized is a positive $4,500.

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.