Question 1

A three-party exchange is used to remedy a situation in which one party wants a nontaxable exchange while the other party wishes to sell property.

Accepted Answer

In a three-party exchange, a third party acts as an intermediary to facilitate a nontaxable exchange between two other parties, one of whom wishes to sell property. This allows both parties to achieve their desired outcome without triggering tax liability.

Question 2

A total residence can qualify as a principal residence if it is used partly for business purposes.

Accepted Answer

Only that portion of the residence that is used as a principal residence can qualify for the exclusion if the residence is used partly for business purposes.

Question 3

fte exchange of land for an oﬃce building qualiﬁes as like kind property, but the exchange of a vacant lot for a warehouse would not.

Accepted Answer

Since the exchange of any business or investment realty for other business or investment realty qualiﬁes as a like-kind exchange, both of these would qualify.

Question 4

Jim Jones went to court to stop a state commission from acquiring his property to widen a state highway. fte court ruled for the state highway commission, whereupon the commission paid Jim the amount ﬁxed by the court. Jim's property was involuntarily converted.

Accepted Answer

Jim's property was acquired without his voluntary consent, therefore it is an example of involuntary conversion.

Question 5

If an exchange of property involves the assumption of a liability by the transferee it is treated like boot received by the transferee.

Accepted Answer

the transferor will recognize gain under the same rules as in a boot received situation. (It is as if the transferor received cash and then paid oﬀ the liability.)

Question 6

Taxpayers that realize a loss on a like-kind exchange will immediately derive tax beneﬁts associated with deducting the loss.

Accepted Answer

Taxpayers that realize a loss on a like-kind exchange must wait to recognize the tax beneﬁts associated with deducting the loss.

Question 7

A like-kind exchange would occur when a business trades in a truck as a part of the consideration in the purchase of a new truck.

Accepted Answer

A like-kind exchange occurs when a business truck is traded in for a new business truck.

Question 8

It is possible for both parties to receive boot in a like-kind exchange if one party receives cash and the other party is treated as having received boot by having been released from more debt than it assumed on the exchange.

Accepted Answer

It is possible for both parties in a like-kind exchange to receive boot.

Question 9

If the taxpayer's investment in an apartment building is condemned by the local government, the taxpayer can replace it with any other rental property; it does not have to be another apartment building.

Accepted Answer

the replacement for a condemnation of real property need only be like-kind; it would in this case not have to be an apartment building.

Question 10

Rose Rambler, a calendar-year taxpayer, owned a rental building that was condemned by the state on April 30, 2012. fte state paid Rose the fair market value of the property on Jun 29, 2012. Rose must replace her property by December 31, 2015, to avoid reporting the gain.

Accepted Answer

the time for replacement is the last day of the year 3 years after the proceeds are received (June 29, 2012). ftus, the property needs to be replaced by December 31, 2015.

Question 11

If a taxpayer becomes physically or mentally incapable of self-care, the taxpayer must have owned and used the residence as a principal residence for a period of at least 18 months during the ﬁve years preceding the sale in order to consider the residence as being used while in a nursing home.

Accepted Answer

If a taxpayer becomes physically or mentally incapable of self-care, the taxpayer is deemed to use a residence as a principal residence during the time in which the taxpayer owns the residence and resides in a care facility licensed by a State or political subdivision such as in a nursing home
 the taxpayer must have owned and used the residence as a principal residence for a period of at least one year during the ﬁve years preceding the sale in order to use this provision.

Question 12

fte exchange of a warehouse for a printing press is a nontaxable like-kind exchange of property.

Accepted Answer

ftis is an exchange of real property for personal property so it does not qualify as a like-kind exchange

Question 13

Ed Edmonds exchanged a business truck with an adjusted basis of $320,000 for another business truck with a fair market value of $20,000, a boat with a fair market value of $6,000, and $2,000 cash. What is the basis of the new truck?

Accepted Answer

the basis is $24,000 ($32,000 adjusted basis of old asset less the boot received of $8,000). Although there was a realized loss of $4,000, there was no recognized loss.

Question 14

A widowed taxpayer's period of ownership of a residence includes the period the deceased spouse owned and used the property before death.

Accepted Answer

The widowed taxpayer's period of ownership includes the period the deceased spouse owned and used the property before death, according to IRS regulations. This is important for determining the length of time the residence has been owned, which can affect tax implications such as capital gains taxes when the property is sold.

Question 15

fte time during which the taxpayer's spouse or former spouse owned the residence cannot be added to the taxpayer's period of ownership.

Accepted Answer

the time during which the taxpayer's spouse or former spouse owned the residence can be added to the taxpayer's period of ownership.

Question 16

John Jobs is a successful building contractor who constructs and occupies a new home approximately once every two or three years. Given he is married and satisﬁes the various requirements, he may exclude up to $500,000 in gain on such sales once every two years.

Accepted Answer

If all the requirements are met, he can use the exclusion repeatedly.

Question 17

Ruth Rumsfeld inherited a home in 2012 that had a basis to her of $100,000. She moved into the inherited home and made it her new principal residence. She sold her former principal residence she had lived in for the past six years for $90,000, realizing a gain of $20,000. She must report the $20,000 gain because she did not reinvest the proceeds in her new principal residence.

Accepted Answer

the re is no need to reinvest the proceeds to get the exclusion on the sale of a residence

Question 18

A realized loss on the sale of a residence may be either deducted or added on to the basis of the new residence.

Accepted Answer

A realized loss on the sale of a residence may not be deducted nor may it be added on to the basis of a new residence
 the new law has not changed this from the old law.

Question 19

Jake Jacobson sold his personal residence on June 15, 2012, which he had purchased a year earlier, in order to accept a position at a new college 500 miles further away. Jake may not exclude any gain on the sale since he did not live in the residence for at least two years.

Accepted Answer

Jake can get a pro-rated exclusion if the move was job related

Question 20

fte exchange of a personal residence for land qualiﬁes as a nontaxable exchange.

Accepted Answer

the use of personal-use property will not qualify the transaction for nontaxable exchange

Quiz 11: Property Transactions: Nonrecognition of Gains and Losses