DETERMINATION OF GAIN OR LOSS, BASIS CONSIDERATIONS, AND NONTAXABLE EXCHANGES.doc

Property Transactions: Gain or Loss, Basis, Nontaxable Exchanges13-85CHAPTER 13PROPERTY TRANSACTIONS: DETERMINATION OF GAIN OR LOSS, BASIS CONSIDERATIONS, AND NONTAXABLE EXCHANGESInstructor: The test items in both the print Test Bank and ExamView test-creation software are numbered by question type within each chapter. Thus, users of ExamView can more easily preview their selections using the printed Test Bank in the same numbering system.Learning Objective, Level of Difficulty, Estimated Time to Completion, and the AACSBs and AICPAs Core Competencies for each test item are located within the item itself.Status:Q/PQuestion/Presentin PriorProblemTopicEditionEditionTRUE OR FALSE1Realized gain or loss: definition ofUnchanged12Amount realized: mortgage assumptionUnchanged23Amount realized: mere decline in value distinguishedModified34Amount realized and liabilitiesUnchanged45Fair market value: definition ofUnchanged56Capital additions versus repairs and maintenanceUnchanged7 and effect on basis7Cost recovery: allowed and allowableNew8Casualties and adjusted basisUnchanged99Casualties and adjusted basisNew10Casualties and recognized gainUnchanged1011Corporate distributions: effect of earnings andUnchanged11 profits12Corporate distributions: return of capitalModified1213Amortizable bond premiumNew14Amortizable bond premium and discountUnchanged1515EasmentsUnchanged1616Gains and losses on personal use assets Unchanged1717Bargain purchase New18Cost identification for securitiesUnchanged2019Lump-sum purchaseUnchanged2120Goodwill: purchased versus developedUnchanged2221Nontaxable stock dividendsUnchanged2322Nontaxable stock rightsUnchanged2423Gift basis: appreciated propertyModified2524Gift basis: appreciated property and gift taxNew25Gift basis: depreciationModified2726Gifts and holding periodNew27Inherited property: basisUnchanged29Status:Q/PQuestion/Presentin PriorProblemTopicEditionEdition28Inherited property: alternate valuation dateNew29Inherited property: alternate valuation dateNew30Inherited property: community property versusUnchanged32 common law property basis31Inherited property: holding periodUnchanged3332Disallowed loss: related taxpayersUnchanged3433Disallowed loss: constructive ownershipUnchanged3534Disallowed loss: related taxpayersUnchanged3635Disallowed loss: right of offsetUnchanged3736Disallowed loss: wash saleUnchanged3837Disallowed loss: wash saleNew38Personal use property converted to business useUnchanged3939Personal use property converted to business useNew40Income-producing property converted to business useNew41Gift versus inheritanceUnchanged4042Selection of property for a giftUnchanged4143Nontaxable exchange: justificationNew44Nontaxable exchange: justificationUnchanged4245Nontaxable exchange versus tax-free transactionUnchanged4346Nontaxable exchange: carryover basisUnchanged4447Like-kind exchange: mandatory natureUnchanged4548Like-kind exchange: qualifying propertyNew49Like-kind exchange: qualifying propertyUnchanged4750Like-kind exchange: qualifying propertyUnchanged4851Like-kind exchange: qualifying propertyUnchanged4952Like-kind exchange: qualifying propertyNew53Like-kind exchange: qualifying propertyUnchanged5154Like-kind exchange: qualifying propertyNew55Like-kind exchange: bootUnchanged5356Like-kind exchange: bootNew57Like-kind exchange: bootUnchanged5558Like-kind exchange: basisModified5659Like-kind exchange: basisUnchanged5760Like-kind exchange: holding periodNew61Like-kind exchange: liability as bootUnchanged5962Involuntary conversion: formNew63Involuntary conversion: gains and lossesUnchanged6164Involuntary conversion: replacement propertyNew65Involuntary conversion: replacement propertyUnchanged6366Involuntary conversion: replacement propertyUnchanged6467Involuntary conversion: replacement time periodModified6568Involuntary conversion: required reinvestment andUnchanged66 elective nature69Involuntary conversion: holding periodUnchanged6770Involuntary conversion: direct versus indirectUnchanged6871Involuntary conversion: losses and basisUnchanged6972Sale of residence: exclusion of gainUnchanged7173Sale of residence: election to forgoNewStatus:Q/PQuestion/Presentin PriorProblemTopicEditionEdition74Sale of residence: number of residencesUnchanged7375Sale of residence: requirementsUnchanged7476Sale of residence: partial exclusionUnchanged7577Sale of residence: multiple salesUnchanged7678Sale of residence: amount of exclusion Modified7779Sale of residence: 121 requirements for marriedUnchanged78 couple80Sale of residence: 121 requirements and marriageNew81Sale of residence: general calculation and amountUnchanged79 of 121 exclusion82Section 121 exclusion and 1033 postponementNewMULTIPLE CHOICE1Realized loss: mere decline in valueUnchanged12Amount realizedUnchanged23Amount realized determinedModified34Realized gain or loss: effect of liabilityUnchanged45Recognized gain or loss: effect of nonrecourse debtUnchanged56Adjusted basisUnchanged67Adjusted basis and amount realizedModified78Recognized gain or lossUnchanged89Capital recoveriesNew10Depreciation allowed or allowableUnchanged1011Casualties and adjusted basisUnchanged1112Casualties, adjusted basis, and recognized gainUnchanged1213Corporate distributions: return of capitalUnchanged1314Amortizable bond premiumUnchanged1415Realized versus recognized gain or lossNew16Sale of personal use assetsModified1617Disposition of personal use assetsUnchanged1718Sale of personal use assetsNew19Recovery of capitalUnchanged1820Bargain purchase by employeeUnchanged1921Cost identification for securitiesNew22Lump-sum purchase and allocationUnchanged2123Nontaxable stock dividends: effect ofUnchanged2224Nontaxable stock dividends: basis determinationUnchanged2325Nontaxable stock rightsNew26Nontaxable stock rightsUnchanged2527Gift basisNew28Gift basis: gain basis and loss basisModified2729Gift basisNew30Gift basis: gain basis and loss basisUnchanged2831Gift basis: adjustment for gift tax paidNew32Gift basis: gain basis or loss basisUnchanged3133Gift basis: holding periodModified3234Gift basis: depreciationUnchanged33Status:Q/PQuestion/Presentin PriorProblemTopicEditionEdition35Basis: gift versus inheritanceUnchanged3436Inherited property: basis and holding periodUnchanged3537Deathbed giftsUnchanged3638Deathbed giftsUnchanged3739Inherited property: community property basisUnchanged3840Inherited property: common law basis versus New community property basis41Inherited property: holding periodUnchanged4042Inherited property: alternate valuation dateUnchanged4143Disallowed loss: related taxpayersUnchanged4244Disallowed loss: right of offsetUnchanged4345Disallowed loss: wash saleUnchanged4446Wash sale: holding periodModified4547Personal use property converted to business useUnchanged4648Personal use property converted to business useNew49Nontaxable exchangeUnchanged4750Like-kind exchange: requirementsUnchanged4851Like-kind exchange: qualifying propertyNew52Like-kind exchange: related partyUnchanged5153Like-kind exchange: recognitionNew54Like-kind exchange: boot receivedNew55Like-kind exchange: postponed lossUnchanged5456Like-kind exchange: no postponementModified5557Like-kind exchange: postponed gainUnchanged5658Like-kind exchange: basis formulaUnchanged5759Like-kind exchange: postponed loss and basisUnchanged5860Like-kind exchange: postponed loss, recognizedNew gain, and appreciated boot61Like-kind exchange: holding periodUnchanged6062Like-kind exchange: mortgageUnchanged6163Like-kind exchange: no postponementUnchanged6364Involuntary conversion: general schemeUnchanged6465Involuntary conversion: definedUnchanged6566Involuntary conversion: severance damagesNew67Involuntary conversion: recognized gain and basisUnchanged6768Involuntary conversion: replacement propertyUnchanged6869Involuntary conversion: replacement time periodNew70Involuntary conversion: variousNew71Involuntary conversion: replacement time periodUnchanged7072Involuntary conversion: recognized loss and basisUnchanged7273Involuntary conversion: condemnation of a Unchanged73 personal residence74Sale of residence: realized lossUnchanged7475Sale of residence: various rulesUnchanged7576Sale of residence: realized gainModified7677Sale of residence: recognized gain and basisUnchanged7778Sale of residence: forego 121 exclusionUnchanged7879Sale of residence: gift propertyUnchanged79Status:Q/PQuestion/Presentin PriorProblemTopicEditionEdition80Sale of residence: inherited property and capitalUnchanged80 improvements81Sale of residence: multiple salesUnchanged8182Section 121 exclusion: election to forego for aUnchanged82 married couple83Section 121 exclusion: married couple and singleUnchanged83 ownership84Exchange of certain insurance contractsUnchanged8585Section 1031, 1044, and 1045 transfersNew86Section 1044 rolloverNewPROBLEMS1Amount realized and recognized gainUnchanged12Amount realized and liabilitiesUnchanged23Realized and recognized gainUnchanged34Depreciation and adjusted basisUnchanged45Casualties and adjusted basisUnchanged56Amortizable bond premiumUnchanged67Corporate distributionNew8EasementsUnchanged89Disposition of personal use asset and adjusted basisUnchanged910Cost identification for securitiesUnchanged1011Lump-sum purchase and allocationModified1112Nontaxable stock dividendsUnchanged1313Gift basis adjustment for gift taxNew14Gift basis: adjustment for gift tax paidUnchanged1415Gift basis: gain basis and loss basisUnchanged1516Inherited property: basis and holding periodModified1617Deathbed giftsUnchanged1718Inherited property: common law basis versus Unchanged18 community property basis19Disallowed loss: related taxpayersNew20Disallowed loss: wash saleUnchanged2021Personal use property converted to business useUnchanged2122Like-kind exchange: qualifying propertyUnchanged2223Like-kind exchange: boot received and basis Unchanged2324Like-kind exchange: boot received includingUnchanged24 liability25Like-kind exchange: related parties, recognized Unchanged25 loss, and basis26Like-kind exchange: postponed loss, mortgageNew assumed, recognized gain, and basis27Involuntary conversion: replacement propertyUnchanged2828Involuntary conversion: recognition, basis, andUnchanged29 replacement time period29Involuntary conversion: direct conversionUnchanged3030Involuntary conversion: recognized gain and basisModified31Status:Q/PQuestion/Presentin PriorProblemTopicEditionEdition31Involuntary conversion: required reinvestmentUnchanged3232Section 121 exclusion: recognized gain, basis, andModified34 capital expenditures33Section 121 exclusion: ownership and occupancyUnchanged35 requirements34Section 121 exclusion: recognized gainUnchanged3735Section 1032 exchange of stock for propertyUnchanged3836Transfer of property between spousesModified39ESSAY1Amount realized: formulaUnchanged12Amount realized and liabilitiesNew3Adjusted basis: formula for determiningUnchanged24Depreciation and cost recoveryUnchanged35Casualty loss and basisUnchanged46Amortizable bond premiumUnchanged67Corporate distribution: return of capital Unchanged78Recovery of capital doctrineNew9Lump-sum purchase and allocationUnchanged910Nontaxable stock rightsNew11Gift basis: adjustment for gift tax paidUnchanged1012Gift property and inherited property: holding periodUnchanged1213Inherited property: community property versusUnchanged13 common law property14Disallowed loss: right of offsetUnchanged1515Disallowed loss: related taxpayersNew16Disallowed loss: wash saleNew17Selection of property for gifts and bequestsUnchanged1618Like-kind exchange: logicUnchanged1819Like-kind exchange: qualifying propertyUnchanged1920Like-kind exchange: related partiesUnchanged2021Like-kind exchange: basis and holding periodUnchanged2122Like-kind exchange: bootUnchanged2223Like-kind exchange: liability as bootUnchanged2424Involuntary conversions: gainsUnchanged2525Involuntary conversions: lossesUnchanged2626Involuntary conversion: direct versus indirectUnchanged2727Section 121 exclusion: principal residenceUnchanged2828Section 121 exclusion: prior 121 exclusion and Unchanged30 general requirements29Section 121 exclusion and 1033 postponementNew30Exchange of certain insurance contractsUnchanged3331Qualified small business stockUnchanged34TRUE/FALSE1.Realized gain or loss is measured by the difference between the amount realized from the sale or other disposition of property and the propertys adjusted basis at the date of disposition.ANS:TRealized gain or loss is the difference between the amount realized and the propertys adjusted basis.PTS:1DIF:1REF:p. 13-3OBJ:1NAT:AICPA FN-Measurement | AACSB AnalyticMSC:2 min2.Molanda sells a parcel of land for $18,000 in cash and the buyer assumes Molandas mortgage of $12,000 on the land. Molandas amount realized is $30,000.ANS:TThe amount realized includes the cash of $18,000 and the mortgage of $12,000 assumed by the buyer.PTS:1DIF:1REF:p. 13-3 | Example 4OBJ:1NAT:AICPA FN-Measurement | AACSB AnalyticMSC:2 min3.If Wal-Mart stock increases in value during the tax year by $4,500, the amount realized is a positive $4,500.ANS:FIncreases or decreases in the value of an asset during the tax year do not affect the amount realized.PTS:1DIF:1REF:Example 2OBJ:1NAT:AICPA FN-Measurement | AACSB AnalyticMSC:2 min4.If the buyer assumes the sellers liability on the property acquired, the sellers amount realized is decreased by the amount of the liability assumed.ANS:FThe sellers amount realized is increased by the amount of the liabilities assumed by the buyer.PTS:1DIF:1REF:Example 4OBJ:1NAT:AICPA FN-Measurement | AACSB AnalyticMSC:2 min5.The fair market value of property received in a sale or other disposition is the price at which property will change hands between a willing seller and a willing buyer when neither is compelled to sell or buy.ANS:TPTS:1DIF:1REF:p. 13-4OBJ:1NAT:AICPA FN-Measurement | AACSB AnalyticMSC:2 min6.Expenditures made for ordinary repairs and maintenance of property are not added to the original basis in the determination of the propertys adjusted basis whereas capital expenditures are added to the original basis.ANS:TOnly expenditures that are capitalized are added to a propertys adjusted basis. Expenditures for ordinary repairs and maintenance may be deductible in the current tax year if they are for business or income-producing property.PTS:1DIF:1REF:p. 13-5OBJ:1NAT:AICPA FN-Measurement | AACSB AnalyticMSC:2 min7.Deductions taken for depreciation or cost recovery on business or income-producing property reduce the adjusted basis of the property.ANS:TPTS:1DIF:1REF:p. 13-5OBJ:1NAT:AICPA FN-Measurement | AACSB AnalyticMSC:2 min8.The adjusted basis of property that is stolen is reduced by the amount of insurance proceeds received and by any recognized loss.ANS:TPTS:1DIF:1REF:p. 13-5 | Example 5OBJ:1NAT:AICPA FN-Measurement | AACSB AnalyticMSC:2 min9.Monroes delivery truck is damaged in an accident. Monroes adjusted basis for the delivery truck prior to the accident is $20,000. If Monroe receives insurance proceeds of $21,000 and recognizes a casualty gain of $1,000, his adjusted basis for the delivery truck after the accident is $21,000.ANS:FInitially, Monroe does increase the adjusted basis of the delivery truck by the casualty gain of $1,000 ($20,000 + $1,000 = $21,000). However, Monroe must then reduce the adjusted basis of the delivery truck by the amount of the insurance proceeds received ($21,000 $21,000 = $0). Thus, Monroe now has two assets; cash with an adjusted basis of $21,000 and a delivery truck with an adjusted basis of $0. Note that if Monroe uses some or all of the cash to repair the delivery truck, the adjusted basis of the delivery truck is increased by this amount.PTS:1DIF:1REF:Example 6OBJ:1NAT:AICPA FN-Measurement | AACSB AnalyticMSC:5 min10.If insurance proceeds are received for property used in a trade or bus