M2: Taxable & Nontaxable Dispositions

Question 1

Exchange Like-Kind Business/Investment Assets (Tangible)

Answer 1

Real property = does not have to be same “general” use
Personal property = must be same “general use”

Basis rules: Basis in like kind property received = FMV of like kind basis property received - deferred gain + deferred loss (used when boot/loot is involved)

Gain realized = Amt realized - adj. basis of property given up

• Adj basis = orig. cost - depreciation
• Amt realized = FMV of new property + FMV of boot received - FMV of boot paid

Gain/loss recognized = lesser of realized gain or boot received (realized loss never recognized)

• boot received = cash received + FMV of non like kind property received + net relief from liability
• boot paid =Cash paid + FMV of non-like-kind property paid + Net liability assumed

Gain/loss deffered = Gain realized - gain recognized

Basis of new property = FMV of property received - Deferred gain + Deferred loss

Question 2

HIDEIT (Gain) or WRaP (loss)

Answer 2

Homeowner's exclusion: 
Involuntary conversion
Divorce property settlement
Exchange of like kind business
Installment sale
Treasury capital stock

Wash sale losses
Related party losses
And
Personal losses

Question 3

Like kind investment

Answer 3

means same type of investment (with the exception of inventory, stock, securities, partnership interests, and real property in different countries)

Question 4

Homeowner’s Exclusion

Answer 4

Amount of exclusion:
- 500k is available to married couples
- $250k is available for singe
Qualifying for the Exclusion:
- two years or more during the 5 year period taxpayer mush own and used the property
No age requirement
No rollover
Exclusion is renewable

Question 5

Involuntary conversion

Answer 5

Basis of new property is equal to the cost of the new property reduced by the gain on the old property that was not recognized

Question 6

Involuntary conversion

Answer 6

Basis of new property is equal to the cost of the new property reduced by the gain on the old property that was not recognized