1) Henry swaps his shopping center for Sarah’s office building, and the exchange qualifies as a like-kind exchange. Henry’s adjusted basis for the shopping center is $600,000 and the center is subject to a liability of $180,000. The FMV of Sarah’s office building is $770,000 and it is subject to a liability of $100,000. Each asset is transferred subject to the liability. What is Henry’s recognized gain, if any, on the transaction; and what is his basis in the office building?

 

2) Prince Corp. owns a warehouse with an adjusted basis of $400,000. The warehouse is destroyed by an earthquake. The insurance company paid Prince $750,000 as compensation for the loss on the warehouse. Ten months after the loss, Prince uses the insurance proceeds and other funds to acquire a new warehouse for $682,000 and equipment for its factory at a cost of $90,000. Assuming that Prince elects to defer as much of the gain on the conversion as possible, what is its recognized gain, its basis in the new warehouse, and its basis in the equipment it acquired?

 

3) Peter, a single taxpayer, bought a house to use as a rental property on April 1, 2007, for $300,000. He moved into the house on June 1, 2013, and used it as his personal residence until August 1, 2014, when he sold it for $500,000. Depreciation taken while the property was used as a rental property was 25,000. What was Peter’s

 

a) realized gain on the sale of the property?

 

b) recognized gain on the sale of the property?

 

c) recognized gain on the sale of the property if it is not sold until August 1, 2015, for $500,000?

 

 

 

4) Burton wants to purchase land owned by Kelly for use in his trade or business. Kelly’s basis in the land is $150,000, and Burton has offered to pay $800,000 if she will sell within the next ten days. Kelly is interested in selling but wants to avoid gain recognition on the sale. Is there any way that Kelly could sell to Burton and still avoid gain recognition?

 

5) In a “like-kind” exchange of an investment asset for a similar asset that will also be held as an investment, no taxable gain or loss will be recognized on the transaction if both assets consist of:

 

a) Rental real estate located in different states.

 

b) Convertible preferred stock.

 

c) Convertible debentures.

 

d) Partnership interests.

 

 

 

6) In Year 9, Ralston exchanged commercial real estate that she owned for other commercial real estate plus cash of $50,000. The following additional information pertains to this transaction:

 

Property given up by Ralston

 

Fair value                             $ 500,000

 

Adjusted basis                  300,000

 

Property received by Ralston

 

Fair value                             450,000

 

What amount of gain should be recognized in Ralston’s Year 9 income tax return? Explain.

 

7) A taxpayer is trading in an automobile used solely for business purposes for another automobile to be used in his business. The automobile originally cost $35,000 and he has taken $12,000 in depreciation. The old automobile is currently worth $20,000 and the new automobile the taxpayer wants in exchange is worth $20,000. No other cash or property is exchanged in the transaction. What is the gain or loss realized and recognized by the taxpayer on this transaction, and what is the taxpayer’s basis in the new automobile?

 

8) A taxpayer is trading in an automobile used solely for business purposes for another automobile to be used in his business. The automobile originally cost $35,000 and he has taken $18,000 in depreciation. The old automobile is currently worth $20,000 and the new automobile the taxpayer wants in exchange is worth $22,000. The taxpayer has agreed to pay $2,000 cash in addition to the trade-in. What is the taxpayer’s realized and recognized gain or loss on the transaction and his basis in the new automobile received?

 

9) A taxpayer is trading in an automobile used solely for business purposes for another automobile to be used in his business. The automobile originally cost $35,000 and he has taken $18,000 in depreciation. The old automobile is currently worth $20,000 and the new automobile the taxpayer wants in exchange is only worth $16,500. The other party agrees to give the taxpayer a trailer worth $3,500 in addition to the new auto. What is the taxpayer’s gain or loss realized and recognized on the transaction and what is his basis in the new automobile received?

 

10) A taxpayer is trading in an automobile used solely for business purposes for another automobile to be used in his business. The automobile originally cost $35,000 and he has taken $18,000 in depreciation. The old automobile is currently worth $20,000 and the new automobile the taxpayer wants in exchange is only worth $17,500. The other party agrees to give the taxpayer $2,500 in cash in addition to the new auto. What is the gain or loss realized and recognized by the taxpayer on this transaction and what is his basis in the new auto?