M2-Taxable and Nontaxable Dispositions

Question 1

A wash sale occurs when a taxpayer does what?

Answer 1

Sells stock at a loss and invests in substantially identical stock within 30 days before or after the sale.

This would make and loss not deductible because it is a wash sale.

Question 2

Nonrecognition treatment is accorded to a “like-kind” exchange of property used in the trade or business or held for investment (with the exception of inventory, stock, securities, partnership interests, and real property in different countries). “Like-kind” means the same type of investment (e.g., realty for realty or personalty for personalty, assuming the personal property falls within the same “asset class” for tax depreciation purposes) (true or false)

Answer 2

True

The exchange of a corporate office building for a vacant lot qualifies for like-kind nonrecognition treatment. (realty for realty)

Although trading a company jet for a large truck to be used in the corporation is exchanging personal property used in a trade or business, the “asset classes” for the corporate jet and the heavy equipment differ.

The exchange of investment securities for antiques to be held as investments does not qualify for nonrecognition treatment. It is one of the exceptions identified in the rule above.

Question 3

Gain recognized when no boot is received is what?

Answer 3

The lesser of gain realized or boot received. So most likely $0.

Question 4

Gain recognized when boot is received is what.

Answer 4

The lessor of the amount of gain realized or amount of the boot received.

Question 5

Realized loss is never recognized in like-kind exchanges. (true or false)

Answer 5

true

Question 6

Provided the taxpayer has lived in his home for 2 years or more out of the 5 years preceding his/her sale of his/her residence, as a single taxpayer he/she may exclude up to $250,000 of gain on its sale. (true or false)

Answer 6

true