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

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Question 31

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Sam's office building with an adjusted basis of $625,000 and a fair market value of $885,000 is condemned on December 30,2010.Sam is a calendar year taxpayer.He receives a condemnation award of $850,000 on March 1,2011.He builds a new office building at a cost of $830,000 which is completed and paid for on December 31,2013.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?

A) $0;$605,000.
B) $20,000;$830,000.
C) $20,000;$625,000.
D) $225,000;$830,000.
E) None of the above.

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

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Question 32

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Andrew acquires 2,000 shares of Eagle Corporation stock for $100,000 on March 31,2003.On January 1,2010,he sells 125 shares for $5,000.On January 22,2010,he purchases 135 shares of Eagle Corporation stock for $6,075.When does Andrew's holding period begin for the 135 shares?

A) January 22,2010.
B) January 1,2010.
C) March 31,2003.
D) March 31,2003,for 125 shares and January 22,2010,for 10 shares.
E) None of the above.

F) C) and E)
G) D) and E)

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Question 33

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Amy received nontaxable stock rights on February 3,2010.She allocated $8,000 of the $30,000 basis for the associated stock to the stock rights.The stock rights are exercised on October 2,2010.The exercise price for the stock is $25,000.What is the taxpayer's basis for the acquired stock?

As part of the divorce agreement,Hale transfers his ownership interest in their personal residence to Monica.The house had been jointly owned by Hale and Monica and the adjusted basis is $410,000.At the time of the transfer to Monica,the fair market value is $600,000.What is the recognized gain to Hale,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)qualifies as a like-kind exchange.

Gift property (disregarding any adjustment for gift tax paid by the donor) :

Vanessa's personal residence was condemned,and she received a condemnation award of $475,000.Vanessa had owned and occupied the residence for 15 years.The adjusted basis in the residence at the time of condemnation was $200,000.Vanessa used part of the condemnation proceeds to purchase a new residence for $210,000.What is Vanessa's recognized gain or loss and her basis in the new residence?

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.

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.

Which of the following types of exchanges of insurance contracts qualify for nonrecognition treatment under § 1035?

Rita owns a horse farm with 450 acres of land (adjusted basis of $900,000) .Twenty-five acres of the land are condemned by the state for $250,000 in order to build a highway.Since the fair market value of Rita's farm is significantly decreased by the proximity to the future highway,the state awards Rita $225,000 in severance damages.Rita does not use the $225,000 to restore the usefulness of the farm and all of the $475,000 proceeds are invested in the stock market.What is her recognized gain or loss associated with the receipt of the severance damages?

Fran was transferred from Phoenix to Atlanta.She sold her Phoenix residence (adjusted basis of $180,000) for a realized loss of $40,000 and purchased a new residence in Atlanta for $225,000.What is Fran's recognized gain or loss on the sale of the Phoenix residence and her basis for the residence in Atlanta?

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?

Bond premium on tax-exempt bonds must be amortized.The annual amortization reduces the owner's taxable income and decreases the adjusted basis for the bond.

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?

Virginia,who is single,sells her principal residence (adjusted basis of $150,000) on January 5,2010,for $380,000.She has owned and occupied it as her principal residence for 20 years.She incurs a realtor's commission of $22,000 and legal fees of $5,000.On January 3,2010,Virginia purchases a townhouse for $300,000 and uses it as her principal residence.Because it was not near a convenience store,she sells the townhouse on December 20,2010,for $330,000.She incurs a realtor's commission of $18,000 and legal fees of $4,000.She buys a house on December 1,2010,for $250,000 and uses it as her principal residence.What is Virginia's recognized gain on the sale of each house and her adjusted basis for the house purchased on December 1,2010?

A taxpayer can recognize a realized loss on a § 1031 like-kind exchange.

If insurance proceeds are received for property used in a trade or business,a casualty transaction can result in recognized gain or recognized loss.

Any realized gain or loss on the transfer of investment property between spouses is not recognized and any property involved has a carryover basis.

Which of the following is correct?