Chapter 667 11 Property Transactions

Chapter 667 11 Property Transactions - Chapter 667 11...

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Chapter 667 11 Property Transactions: Nonrecognition of Gains and Losses TRUE-FALSE QUESTIONS CHAPTER 11 *Some of the true-false questions have been adapted from the IRS Examinations. 1. Alfred Ahern sold a truck with an adjusted basis of $6,000 for $1,500 to a salvage yard. He purchased a replacement truck two months later for $24,000. Alfred s basis in the new truck is $28,500. 2. Ed Evans traded in a large lathe used in his business with an adjusted basis of $7,000 for a smaller lathe valued at $8,000. In addition to the smaller lathe, Ed received $2,000 cash. Ed s recognized gain is $3,000. 3. Leonard Longstreet owns a rental building with an adjusted basis of $300,000 and a fair market value of $280,000. In July 2009, the state condemned the property for a highway project and paid him $280,000, which he immediately reinvested in a similar rental property. Leonard may recognize a loss. 4. Melvin Monroe reads in the newspaper that the state highway department has decided to take his property for public use. He veri es the news by phoning an of cial of the highway department who is involved in the project acquiring this property. This is a threat of condemnation. 5. Ray Rambler s of ce building with a basis of $75,000 was condemned by the county which paid him $120,000 as compensation. He purchased a new new of ce one year later for $105,000. Ray is entitled to postpone all of the $45,000 realized gain. 6. The exclusion on the sale of a personal residence is $500,000 for taxpayers ling jointly and as single individuals. 7. A taxpayer is required to own and occupy the residence three out of the last ve years in order to qualify for the exclusion. 8. Unimproved land can be exchanged for an apartment house and qualify as a like- kind exchange. 9. The general like-kind exchange rule is that there is nonrecognition of loss but recognition of gain. 10. In a like-kind exchange, gains and losses are never recognized. 11. If boot is received in a like-kind exchange, realized losses are not recognized but realized gains may be recognized. 12. A liability assumed by a transferee is considered boot received by the transferor. 13. The requirements for replacement property under a casualty and theft are less restrictive than for like-kind exchanges. 14. Nonrecognition of gain is mandatory regardless of whether an involuntary conversion is for money or property. 15. Losses from involuntary conversions are never recognized. 16. Loss from the sale of a personal residence is never recognized but gain from the sale of a personal residence may be recognized. 17. The exlusion may be taken on a sale of a residence once each year, assuming a sale takes place that often. 18. Any excluded gain on the sale of the residence reduces the basis of the new residence. 19.
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Chapter 667 11 Property Transactions - Chapter 667 11...

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