Lesson 8 (Ch. 13)

Question 1

IRC Section 121 excludes gain up to…(Sale of a primary residence)

Answer 1

$500,000 MFJ

$250,000 all other taxpayers

Question 2

What is the definition for “Like-Kind Property” in a 1031 exchange?

Answer 2

Only real property (real estate), same nature and character.

Improved for unimproved qualifies
Foreign for Foregin property qualifies
U.S. for Foreign property does not qualify
Commercial for Residential does not qualify

Question 3

Non-simultaneous 1031 exchange timeline

Answer 3

Sale of Property
Identify Exchange Property (45 days)
Closing on Replacement Property (Earlier of 180 days or filing due date of tax return)

Question 4

Related party 1031 exchange

Answer 4

Deferred gain is recognized in year of disposition if related party disposes of the property within two years.

Does not apply if…
Either party dies before sale, or tax avoidance is not a motivation.

Related parties include >50% equity interest in a corporation.

Question 5

What is “boot”?

Answer 5

Cash or other non-like-kind-property received in a like kind exchange. Includes debt relief.

Ex. Cash, Securities or Mortgage

Question 6

Partial Section 121 Exclusion formula (sale due to change in employment, change of health, other unforeseen circumstance)

Answer 6

Max exclusion amount x number of qualifying months/24 months = Partial Exclusion