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Jason exchanged office furniture (seven-year life) for other furniture (seven-year life).
The old furniture had an adjusted basis of $17,000, and the new furniture had an FMV of $26,500.
Jason also paid $6,500 cash in the exchange.
What are the recognized gain or loss and the basis of the furniture?
 
($9,500) and $10,500.
$0 and $17,000.
$7,500 and $17,000.
$0 and $23,500
 
0 = because no BOOT was received
26500 – 17000 = 9500 (postponed gain)
26500 + 6500 – 9500 = 23500
   
On June 15, 2017, Allen sold land held for investment to Stan for $71,000 and an installment note of
$320,000 payable in five equal annual installments beginning on June 15, 2018, plus interest at 10%.
Allen’s basis in the land is $218,960.
What amount of gain is recognized in 2017 under the installment method?
 
 
$71,000.
$31,240
$218,960.
$0.
   
Ava exchanges a machine used in her business with Gail for another machine.
The basis of Ava’s old machine is $60,000, the FMV is $79,000, and she gives Gail cash of $21,000.
Gail’s basis in her machine is $85,000, and the FMV is $100,000.
What is Ava’s adjusted basis in the new machine she receives?
 
$79,000.
$60,000.
$81,000
$100,000.
 
100000 – (79000 – 60000) = 81000
   
Daniel, who is single, purchased a house on May 15, 1994, for $119,000. During the years he owned the
house, he installed a swimming pool at a cost of $26,000 and replaced the driveway at a cost of $13,000.
On April 28, 2017, Daniel sold the house for $476,000. He paid a realtor commission of $29,400 and legal
fees of $1,200 connected with the sale of the house.
What is Daniel’s recognized gain on the sale of the house?
 
$287,400.
$318,000.
$0.
$37,400
   
Julie transferred a building with an adjusted basis of $240,000 for another building with a fair market
value of $350,000 and $25,000 in cash. The exchange qualified as a like-kind exchange.
 
The realized gain on the exchange was $_________.
The recognized gain on the exchange was $__________.
Julie's adjusted basis in the building received is $__________.
 
135,000
25,000
240,000
   
When a buyer makes a down payment in the year of sale and then agrees to pay the remainder of
the sale proceeds over a period of time,
The arrangement is referred to as a(n) ________  ________.
 
Installment; sale
   
Which of the following situations does not qualify as an involuntary conversion?  question.
A car was damaged in an automobile accident
A building was sold to pay off a court judgment
A tract of land was seized by the government to widen a highway
A diamond ring was stolen from a hotel room
   
Will's Whitewater Rafting sold 3 acres of land used in the business. The sales price was $6,000 and the
adjusted basis of the land was $4,200.
Will receives a down payment of $4,000 at the time of sale and the remaining $2,000 early next year.
The realized gain on the sale is $___________.
Will's recognized gain for the current year is $_________ and the gain recognized next year will be $__________.
 
1,800
1,200
600
   
Losses resulting from involuntary conversions are deductible immediately as _________, _________,
or/and _________.
 
casualty;  losses; or loss
   
Section 1245 depreciation recapture related to an installment sale will be deferred and recognized
over the life of the installment sale using the gross profit percentage.
 
False
   
For both personal and real property, qualified property for an involuntary conversion must be similar
and related in service or use to the property that was involuntarily converted.
 
replacement
   
In a direct conversion, where a taxpayer defers the recognition of gain on the exchange of property,
the adjusted basis in the property received is equal to the of the property involuntarily converted.
tax basis
   
Daniel is single and was given a house by his parents several years ago.He has used the home as his personal
residence since it was given to him. Daniel's basis in the home was only $65,000. Due to the expansion of the city,
he was able to sell the house for $320,000. How will this transaction be treated for tax purposes?
 
The $255,000 gain is excluded from taxation because it qualifies as a primary residence.
The first $250,000 of the gain can be excluded and the remaining $5,000 gain will be treated as a long-term capital gain.
The first $250,000 of the gain can be excluded and the remaining $5,000 gain will be treated as ordinary income.
The $255,000 gain is classified as a long-term capital gain taxed at preferential rates.
The first $250,000 of the gain can be excluded and the remaining $5,000 gain will be treated as a long-term capital gain.
   
A(n) __________ is any sale of property where the seller receives at least one payment in a taxable
year subsequent to the year of disposition of the property.
 
installment sale
   
To qualify for the exclusion on the sale of a personal residence, the
taxpayer must have owned and used the property as his/her principal
residence for a total of ______ or ________ more years during the -year period ending on the date of sale.
 
2; 5
   
Zeke's Zipline Adventures sold 6 acres of land used in the business. The sales price was $12,000 and the
adjusted basis of the land was $9,000.
Zeke will receive a down payment of $4,000 at the time of sale and the remaining $8,000 early next year.
How much gain will Zeke recognize in the current year?
 
$4,000
$1,000
$3,000
$1,333
 
3,000/12,000 = 25%; $4,000 x .25 = $1,000.
   
Which of the following sales transactions is eligible for recognizing the gain under the installment method
(assuming the terms of the sale meet the definition of an installment sale)?
 
A sale of inventory
A sale of marketable securities
A sale of land
A sale of equipment where the gain is due to depreciation recapture
   
Sandy sold 2 acres of land to her daughter, Tara. Sandy's basis in the land was $800 and she sold the land for $500.
After owning the land for a year, Tara sold it to an unrelated party for $700. Tara's recognized gain on the land is $____________.
 
0
   
Dean has owned a home in Lawrence, Kansas for 20 years. Beginning 3 years ago, Dean has traveled so much
for work that he is rarely home, so he rents that home to an unrelated third party and has no other "primary"
residence. Dean decides to sell his home to his renter for a gain of $100,000. What amount of this gain is taxable?
 
$50,000
$100,000
$0
$100,000
 
All of the gain is taxable since Dean has not "used" the property as his personal residence for the last two years.
   
Section 1245 depreciation recapture related to an installment sale will be deferred and recognized over the
life of the installment sale using the gross profit percentage.
 
false
   
If a taxpayer sells property to a related party, any resulting from the transaction is not recognized for tax purposes.
 
loss
   
True or false: A loss on a sale to a related party can only be recognized if the fair market value of the asset
on the date of the sale can be objectively ascertained.
 
False
 
Losses on related party transactions cannot be deducted for tax purposes.
   
Sandy sold 2 acres of land to her daughter, Tara. Sandy's basis in the land was $800 and she sold the land for $500.
After owning the land for a year, Tara sold it to an unrelated party for $700. Tara's recognized gain on the land is $_______.
 
0