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Exam 7: Property Transactions: Basis, gain and Loss, and Nontaxable Exchange

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Question 31

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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?

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.

F) C) and D)
G) A) and D)

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Question 32

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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?

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Question 33

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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.

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

Helen purchases a $10,000 corporate bond at a premium of $1,000 and elects to amortize the premium.On the later sale of the bond for $10,800,she has amortized $300 of the premium.Helen has a recognized gain of $800 ($10,800 amount realized - $10,000 adjusted basis).

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 basis of personal use property converted to business use is:

Noelle received dining room furniture as a gift from her friend,Jane.Jane's adjusted basis was $9,200 and the fair market value on the date of the gift was $7,000.Noelle decided she did not need the furniture and sold it to a neighbor six months later for $6,500.What is her recognized gain or loss?

A factory building owned by Amber,Inc.is destroyed by a hurricane.The adjusted basis of the building was $400,000 and the appraised value was $425,000.Amber receives insurance proceeds of $390,000.A factory building is constructed during the nine-month period after the hurricane at a cost of $450,000.What is the recognized gain or loss and what is the basis of the new factory building?

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.

On January 15 of the current taxable year,Merle sold stock with a cost of $40,000 to his brother Ned for $25,000,its fair market value.On June 21,Ned sold the stock to a friend for $26,000. a. What are the tax consequences to Merle and Ned? b. Would Ned recognize any gain if he sold the stock for $\$ 41,000$ ?

Jan purchases taxable bonds with a face value of $250,000 for $265,000.The annual interest paid on the bonds is $10,000.Assume Jan elects to amortize the bond premium.The total premium amortization for the first year is $1,600.

Faith inherits an undivided interest in a parcel of land from her father on February 15,2013.Her father purchased the land on August 25,1986 and his basis for the land was $325,000.The fair market value of the land is $12,500,000 on the date of her father's death and is $11,000,000 six months later.The executor elects the alternate valuation date.Faith has nine brothers and sisters and each inherited a one-tenth interest. a. What is faith's adjusted basis for her one-tenth undivided interest in the land? b. What is her holding period for the land?

Which of the following statements is correct for a § 1033 involuntary conversion of an office building which is destroyed by fire?

The holding period of property acquired by gift may begin on:

An office building with an adjusted basis of $320,000 was destroyed by fire on December 30,2013.On January 11,2014,the insurance company paid the owner $450,000.The fair market value of the building was $500,000,but under the co-insurance clause,the insurance company is responsible for only 90 percent of the loss.The owner reinvested $410,000 in a new office building on February 12,2014,that was smaller than the original office building.What is the recognized gain and the basis of the new building if § 1033 (nonrecognition of gain from an involuntary conversion) is elected?

The amount of a corporate distribution qualifying for capital recovery treatment which exceeds the shareholder-recipient's basis in the stock investment is treated as a capital gain.

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?

For the following exchanges,indicate which qualify as like-kind property.

Joyce's office building was destroyed in a fire (adjusted basis of $350,000; fair market value of $400,000) .Of the insurance proceeds of $360,000 she receives,Joyce uses $310,000 to purchase additional inventory and invests the remaining $50,000 in short-term certificates of deposit.She received only $360,000 because of a co-insurance clause in her insurance policy.What is Joyce's recognized gain or loss?