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

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Question 31

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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.

A) True
B) False

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Question 32

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If a husband inherits his deceased wife's share of jointly owned property in a common law state,both the husband's original share and the share inherited from the deceased wife are stepped-up or down to the fair market value at the date of the wife's death.

A) True
B) False

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Question 33

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Evelyn's office building is destroyed by fire on July 12,2017.The adjusted basis is $315,000.She receives insurance proceeds of $350,000 on August 31,2017.Calculate the amount that Evelyn must reinvest in qualifying property in order that her recognized gain be $20,000.Assume she elects § 1033 (nonrecognition of gain from an involuntary conversion) postponement treatment.

If a taxpayer reinvests the net proceeds (amount received - related expenses) received in an involuntary conversion in qualifying replacement property within the statutory time period,it is possible to defer the recognition of the realized gain.

The fair market value of property received in a sale or other disposition is the price at which property will change hands between a willing seller and a willing buyer when neither is compelled to sell or buy.

Lynn purchases a house for $52,000.She converts the property to rental property when the fair market value is $115,000.After deducting depreciation (cost recovery) expense of $1,130,she sells the house for $120,000.What is her recognized gain or loss?

Robert sold his ranch which was his principal residence during the current taxable year.At the date of the sale,the ranch had an adjusted basis of $460,000 and was encumbered by a mortgage of $200,000.The buyer paid him $500,000 in cash,agreed to take the title subject to the $200,000 mortgage,and agreed to pay him $100,000 with interest at 6 percent one year from the date of sale.How much is Robert's realized gain on the sale?

A realized loss whose recognition is postponed results in the temporary recovery of more than the taxpayer's cost or other basis.

Melvin receives stock as a gift from his uncle.No gift tax is paid.The adjusted basis of the stock is $30,000 and the fair market value is $38,000.Melvin trades the stock for bonds with a fair market value of $35,000 and $3,000 cash.What is his recognized gain and the basis for the bonds?

Hilary receives $10,000 for a 15-foot wide utility easement along one of the boundaries to her property.The easement provides that no structure can be built on that portion of the property.Her adjusted basis for the property is $200,000 and the easement covers 15% of the total acreage.Determine the effect of the $10,000 payment on Hilary's gross income and her basis for the property.

The amount of the loss basis of a gift will differ from the amount of the gain basis only if at the date of the gift the adjusted basis of the property exceeds the property's fair market value.

Katie sells her personal use automobile for $12,000.She purchased the car three years ago for $25,000.What is Katie's recognized gain or loss?

The holding period for property acquired by gift is automatically long term.

Which of the following statements is false?

Alice owns land with an adjusted basis of $610,000,subject to a mortgage of $350,000.On April 1,Alice sells her land subject to the mortgage for $650,000 in cash,a note for $600,000,and property with a fair market value of $120,000.What is the amount realized?

Kevin purchased 5,000 shares of Purple Corporation stock at $10 per share.Two years later,he receives a 5% common stock dividend.At that time,the common stock of Purple Corporation had a fair market value of $12.50 per share.What is the basis of the Purple Corporation stock,the per share basis,and gain recognized upon receipt of the common stock dividend?

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?

What is the general formula for calculating the adjusted basis of property?

Discuss the treatment of realized gains from involuntary conversions.

Edith's manufacturing plant is destroyed by fire on the afternoon of November 3,2017.The adjusted basis is $800,000.The insurance company offers a settlement of $700,000.After protracted negotiations,Edith receives $825,000 on June 9,2018.Edith is a fiscal year taxpayer whose tax year ends on June 30th.What is the latest date that Edith can invest the proceeds in qualifying replacement property and elect to defer the gain under § 1033?