Mod 36: Property Transactions Key Areas

Question 1

What is the recognized gain on involuntary conversions?

Lesser of…2

Answer 1

1 realized gain

2 amount not reinvested

Question 2

How do you calculate the new basis in involuntary conversions?

Answer 2

Cost of new property

- gain not recognized

Question 3

When a loss is incurred on an involuntary conversion, it is…

Answer 3

Recognized immediately

Question 4

New basis for new home purchased when you used principal residence deduction of $250,000

Answer 4

Cost of new home

- gain not recognized ($250,000)

Question 5

How do you calculate new basis in a like kind exchange? 4

Answer 5

Old basis of property given up
+ gain recognized
+ boot paid
- boot received

Question 6

Section 1231, applies if 2 characteristics exist

Answer 6

1 personal or real property used in trade or business

2 held for more than 1 year

Question 7

Real property 2 examples

Answer 7

Land, real estate

Question 8

Section 1245, 2

Answer 8

1 Depreciation of sec. 1231 property

2 treated as ordinary income

Question 9

Recapture

Answer 9

Ordinary income

Question 10

Corporations who sell real estate, what are the recapture rules? 2

Answer 10

1 Sec. 291

2 20% of depreciation is recaptured as ordinary income

Question 11

If 1231 gains and losses are netted and produce a 1231 gain, what is the treatment of the income?

Answer 11

Treated as capital gain

Question 12

If 1231 gains and losses are netted and produce a 1231 loss, what is the treatment of the income?

Answer 12

Ordinary loss