1 Individual Chapter 12 Solutions

1 Individual Chapter 12 Solutions - Chapter I:12 Property...

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Chapter I:12 Property Transactions - Nontaxable Exchanges Discussion Questions I:12-1 The statement is not correct. For nontaxable exchanges, taxpayers maintain a continuing investment in comparable property. p. I:12-2. I:12-2 A taxpayer may want to recognize a loss on the exchange. The taxpayer's particular tax situation may make it advantageous to recognize a gain. For example, the taxpayer may be in a low tax bracket or have losses, which may be used to offset the gain. If the exchange is taxable, the basis of the property received may be higher. pp. I:12-2 and I:12-21. I:12-3 a. Debbie's basis for the equipment received in the exchange is $300,000, and the holding period starts on May 10, 2000. b. The exchange is not a like-kind exchange if either Debbie or Doug disposes of the property within two years following the date of the exchange. pp. I:12-7 through I:12-9. I:12-4 a. No. The maximum gain recognized is the realized gain which is the sum of the FMV of the equipment received and the FMV of the marketable securities less the adjusted basis of Kay's equipment. b. No. If the FMV of the marketable securities exceeds the realized gain, the recognized gain is equal to the realized gain. c. The basis of the marketable securities is their FMV. d. The holding period for the marketable securities begins on the day following the date of the exchange. pp. I:12-6, I:12-8, and I:12-9. I:12-5 a. No. To qualify as a like-kind exchange, a direct exchange of property must occur. b. The IRS indicates that a nontaxable exchange may exist when the taxpayer sells property to a dealer and then purchases like-kind property from the same dealer. p. I:12-5. I:12-6 No. The quality or grade of the property is not considered. p. I:12-3. I:12-7 Like class property is tangible personal properties within the same General Asset Class or within the same Product Class. p. I:12-3. I:12-8 The property must be identified within 45 days after the date on which the taxpayer transfers the property relinquished in the exchange and received within 180 days after the date on which the taxpayer transfers the property relinquished in the exchange (but not later than the due date for filing a return for the year in which the transfer of the relinquished property occurs). p. I:12-6. I:12-1
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I:12-9 They might do a nonsimultaneous exchange. Burke may transfer the $800,000 to an escrow account and Kim should locate like-kind property that she wishes to own. p. I:12-6. I:12-10 If Jane identifies like-kind property that she would like to own, Lanny could purchase the property and then exchange the property for Jane’s farm. The exchange is a like-kind exchange for Jane and she does not recognize gain. p. I:12-5. I:12-11 No. The receipt of boot will not cause a realized loss to be recognized. p. I:12-6. I:12-12 A taxpayer who gives boot will recognize a gain if the fair market value of the boot is greater than the basis of the boot. A loss is recognized if the FMV of the boot (assuming the boot is not personal-use property) is less than the basis of the boot. p. I:12-9.
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