Chapter 13 MC Flashcards
An independent sales representative purchased a business car 3 years ago for $12,000. This year he exchanged the old business car now worth $6,000 with an adjusted basis of $5,000 plus $5,000 cash for a new business car with a selling price of $11,000. As a result of this exchange the sales representative recognized
no gain or loss
The taxpayer has realized no taxable gain on the exchange, so there is no recognized gain. The exchange would appear to qualify as a like-kind exchange even if gain were realized. Also, the taxpayer paid cash boot in the exchange, but did not receive boot that would cause the recognition of gain.
Which of the following statements concerning the exclusion of gain on the sale of a principal residence is correct?
There is no requirement that the taxpayer purchase a replacement residence to be eligible for the exclusion.
(A) is incorrect because the occupancy requirement is 2 out of 5 years. (B) is incorrect because the maximum exclusion is $500,000. (D) is incorrect because the maximum exclusion for single taxpayers is $250,000.
A shareholder sells a portion of his stock in a corporation that he purchased at various prices and times. In this situation, which of the following statements concerning the method he may use to determine the basis of these shares is (are) correct?
I. If he can adequately identify the shares sold, he can use the basis of those specific shares.
II. If he is unable to identify the shares sold, he must use a “first-in, first-out” (FIFO) method to determine the basis.
(C). Both I and II are correct.
All the following statements concerning like-kind exchanges of property are correct EXCEPT
A business may exchange real estate for a truck without recognition of gain or loss.
Real estate and trucks are not like-kind property under IRC Sec. 1031.
Michael and Mary, a married couple filing jointly, sell their home this year for $650,000. Their basis in the home, including cost and improvements, is $200,000. Mary purchased the home in her name many years ago and the couple has lived together there since that time. What amount of gain must Michael and Mary recognize from the sale?
(A) $0
The couple is eligible for the full $500,000 exclusion under the rules for married couples. Their realized gain is $450,000 ($650,000 - $200,000). Therefore, no gain is taxable.
