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Exam 15: Property Transactions: Nontaxable Exchanges

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Question 21

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Amy's manufacturing plant is destroyed by fire on the afternoon of October 25,2012.The adjusted basis is $550,000.The insurance company offers a settlement of $520,000.After protracted negotiations,Amy receives $575,000 on June 20,2013.Amy is a fiscal year taxpayer whose tax year ends on June 30th.What is the latest date that Amy can invest the proceeds in qualifying replacement property and elect to defer the gain under § 1033?

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Since the form of the involuntary conver...

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Question 22

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Jake exchanges an airplane used in his business for a smaller airplane to be used in his business.His adjusted basis for the airplane is $325,000 and the fair market value is $310,000.The fair market value of the smaller airplane is $300,000.In addition,Jake receives cash of $10,000.

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Question 23

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Jared,a fiscal year taxpayer with a September 30th year-end,owns an office building (adjusted basis of $715,000) that was destroyed by fire on September 12,2012.If the insurance settlement was $950,000 (received March 1,2013) ,what is the latest date that Jared can replace the office building in order to qualify for § 1033 nonrecognition of gain?

What requirements must be satisfied to receive nontaxable exchange treatment under § 1031?

Which of the following is correct?

Nancy and Tonya exchanged assets.Nancy gave Tonya her personal residence with an adjusted basis of $280,000 and a fair market value of $560,000.The house has a mortgage of $200,000 which is assumed by Tonya.Tonya gave Nancy a yacht used in her business with an adjusted basis of $250,000 and a fair market value of $360,000.What is Tonya's realized and recognized gain?

A taxpayer whose principal residence is destroyed in a fire can use both the § 121 (sale of residence gain exclusion)and the § 1033 (involuntary conversion postponement of gain)provisions.

Lucinda,a calendar year taxpayer,owned a rental property with an adjusted basis of $312,000 in a major coastal city.Her property was condemned by the city government on October 12,2012.In order to build a convention center,Lucinda eventually received qualified replacement property from the city government on March 9,2013.This new property has a fair market value of $410,000.

How does the replacement time period differ for the condemnation of real property used in a trade or business or held for investment when compared with that for other involuntary conversions?

Owen and Polly have been married for three years.Owen sells investment property to Polly for a realized loss of $140,000.Owen's loss of $140,000 is disallowed and Polly's basis for the property she purchased is her cost.

If the recognized gain on an involuntary conversion equals the realized gain because of a reinvestment deficiency,the basis of the replacement property will be more than its cost (cost plus realized gain).

Joyce,a farmer,has the following events occur during the tax year.Which of the events qualify as an involuntary conversion under § 1033 (nonrecognition of gain from an involuntary conversion) ?

Butch sells land with an adjusted basis of $88,000 and a fair market value of $160,000 to Cynthia,his wife,for $160,000.Discuss how the tax consequences would differ if Butch and Cynthia had never been married.

Sammy exchanges equipment used in his business in a like-kind exchange.The property exchanged is as follows: The other party assumes the liability.

Shari exchanges an office building in New Orleans (adjusted basis of $700,000)for an apartment building in Baton Rouge (fair market value of $900,000).In addition,she receives $100,000 of cash.Shari's recognized gain is $100,000 and her basis for the apartment building is $800,000 ($700,000 adjusted basis + $100,000 recognized gain).

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?

Evelyn's office building is destroyed by fire on July 12,2012.The adjusted basis is $315,000.She receives insurance proceeds of $350,000 on August 31,2012.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.

Discuss the logic for mandatory deferral of realized gain or loss for a § 1031 like-kind exchange.

Under what circumstances may a partial § 121 exclusion be available even though the taxpayer has used the § 121 exclusion within the two-year period preceding the sale of the current residence?

If the taxpayer qualifies under § 1033 (nonrecognition of gain from an involuntary conversion) and the amount reinvested in replacement property exceeds the amount realized,the basis of the replacement property is: