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

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Question 21

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To be eligible to elect postponement of gain treatment for an involuntary conversion,what are the three tests for qualifying replacement property?

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The three tests for ...

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Question 22

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If a seller assumes the buyer's liability on the property acquired,the buyer's adjusted basis for the property is increased by the amount of the liability assumed.

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Question 23

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Tara owns common stock in Taupe,Inc.,with an adjusted basis of $250,000.She receives a preferred stock dividend which is nontaxable. a.What effect does the preferred stock dividend have on Tara's adjusted basis of the common stock? b.How is the basis of the preferred stock calculated? c.What effect does the preferred stock dividend have on Tara's gross income?

Identify two tax planning techniques that can be used to avoid the wash sale disallowance of loss.

Elvis owns all of the stock of White Corporation.The accumulated earnings and profits of White Corporation at the beginning of the year are a deficit of $20,000.The current earnings and profits are $30,000.Elvis' basis for his stock is $250,000.He receives a distribution of $300,000 on the last day of the tax year.How much dividend income and/or capital gain should Elvis report?

Tariq sold certain U.S.Government bonds and State of Oregon bonds at a loss to offset short-term capital gain from a previous transaction.He felt that the U.S.Government and State of Oregon bonds were "good" investments,so he repurchased identical securities within one week.Do these transactions constitute wash sales? If the bond sales resulted in the recognition of gain (rather than loss),would the wash sale provisions prevent the gains from being recognized?

Tobin inherited 100 acres of land on the death of his father in 2017.A Federal estate tax return was filed and the land was valued at $300,000 (its fair market value at the date of the death) .The father had originally acquired the land in 1974 for $19,000 and prior to his death had made permanent improvements of $6,000.What is Tobin's basis in the land?

If Wal-Mart stock increases in value during the tax year by $6,000,the amount realized is a positive $6,000.

Abby exchanges an SUV that she has held for personal use plus $24,000 for a new SUV which she will use exclusively in her sole proprietorship business.This exchange qualifies for nontaxable exchange treatment.

Which of the following is incorrect?

Jamie is terminally ill and does not expect to live much longer.Pondering the consequences of her estate,she decides how to allocate her property to her nephews.She makes a gift of depreciated property (i.e.,adjusted basis exceeds fair market value) to Will,a gift of appreciated property (i.e.,fair market value exceeds adjusted basis) to Jim,and leaves appreciated property to Sam in her will.Each of the properties has the same fair market value.From an income tax perspective,which nephew is her favorite?

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.

Over the past 20 years,Alfred has purchased 380 shares of Green,Inc.,common stock.His first purchase was in 1994 when he acquired 30 shares for $20 a share.In 2001,Alfred bought 150 shares at $10 a share.In 2016,Alfred acquired 200 shares at $50 a share.Alfred intends to sell 125 shares at $60 per share in the current year (2017) .If Alfred's objective is to minimize gain and assuming he can adequately identify the shares to be sold,what is his recognized gain?

A realized gain on an indirect (conversion into money) involuntary conversion of business property can be postponed,but a realized loss on an indirect involuntary conversion of business property cannot be postponed.

Sam's office building with an adjusted basis of $750,000 and a fair market value of $900,000 is condemned on November 30,2017.Sam is a calendar year taxpayer.He receives a condemnation award of $875,000 on March 1,2018.He builds a new office building at a cost of $845,000 which is completed and paid for on December 31,2020.What is Sam's recognized gain on receipt of the condemnation award and basis for the new office building assuming his objective is to minimize gain recognition?

For nontaxable stock rights where the fair market value of the rights is 15% or more of the fair market value of the stock,the taxpayer is required to allocate a portion of the stock basis to the stock rights.

Livestock of different sexes can qualify for like-kind exchange treatment if the livestock has been held for over 24 months.

Annette purchased stock on March 1,2017,for $200,000.At December 31,2017,it was worth $210,000.She also purchased a bond on September 1,2017,for $20,000.At year end,it was worth $15,000.Determine Annette's realized and recognized gain or loss.

The basis of inherited property usually is its fair market value on the date of the decedent's death.

A building located in Virginia (used in business) exchanged for a building located in France (used in business) cannot qualify for like-kind exchange treatment.