Chapter 15

Question 1

What are like kind assets?

Answer 1

U.S. real estate used in business or investment

Question 2

What happens when you trade two like kind assets?

Answer 2

Recognition of gains is postponed to a future date. Holding period of gains do not change

Question 3

John owns 1 mil investment in land he paid 100k for 2 decades ago. He swaps the land for another piece of land for 1 mil. What is the gain?

Answer 3

Pre swap unrealized gain is realized by not recognized. Recognized gain is 0 but realized gain is 900k

Question 4

What is boot

Answer 4

Any property involved in exchange that is not “like kind” is boot. Receipt of boot causes gain realized equal to lesser of FMV or gain realized

Question 5

How does the giver of boot recognize the boot

Answer 5

The transfer of boot property may recognize G/L on that boot property

Question 6

What is the basis in boot recieved

Answer 6

FMV

Question 7

What is the basis in LK received?

Answer 7

FMV of new asset
- Gain not recognized
+ Loss not recognized
= Basis in new asset

Question 8

LKE and Boot giver should be treated as what

Answer 8

two separate transactions

Question 9

What are the benefits of a sale of personal residence

Answer 9

One permanent BTD. Realized loss not recognize but realized gain excluded for up to 250k single 500k MFJ. (must have used residence for 2 years in last 5 years of sale)

Question 10

Viro transferred ownership of NY land to stan in exchange for stan transferring Texas land and tesla stock to Viro. Viro bought the land years ago for $600. Stan bought the land for $200 and Tesla stock for $10. Before swap, NY land is worth $1000, TX land 700, and TS worth 300.

How much is total realized gain for Viro and Stan. What is Total taxable gain for both, and what is their basis in each item.

Answer 10

Total realized gain for Viro as result of stock is 400 (FMV of basis - original basis of NY land)

Total realized gain for stan is 790 (1000-210)

Total taxable gain for Viro is lesser of fmv or gain realized as receiver of boot. 300 is FMV of boot so 300 is recognized

Total taxable gain for Stan is 290 for giving the boot, rest is LKE

Viro’s basis in texas land is 700-100 (other gain not realized) and 300 in stock because FMV (gain recognized)

Sta’s basis in NY land is 200 FMV of original basis + 300 FMV of boot = $500