Prop Transactions - Other Nonrecognition Transactions

Question 1

Describe the principal residence-use test.

Answer 1

The residence is used by taxpayer as a principal residence for at least two of the preceding five years.

Question 2

What is the gain on the sale of residence exclusion rule?

Answer 2

A taxpayer may exclude gains up to $250,000 ($500,000 joint return) on the sale of residence.

Question 3

Describe the principal residence-frequency test.

Answer 3

The exclusion is available no more frequently than every two years; limited exceptions.

Question 4

Describe the wash-sale rule.

Answer 4

Losses from the sale of securities are not recognized if similar securities are purchased 30 days before or after the sale.

Question 5

Who is considered to be a related party for individuals for the loss disallowance rule?

Answer 5

Brother, sister, spouse, ancestors, and descendants.

Question 6

Describe the principal residence-ownership test.

Answer 6

The taxpayer must have owned the residence for at least two of the preceding five years. For marital exclusion both must have used the residence but only one had to own it.

Question 7

What are the requirements for the $250,000 exclusion on sale of a residence rule?

Answer 7

1. Frequency test;
2. Ownership test;
3. Use test.