Property Transactions - Nontaxable Exchanges Flashcards
In a nontaxable exchange, realized gains or losses are not recognized, except to the extent of ___________ in the transaction
boot received
Section 1031 provides for nontaxable exchange treatment if the following requirements are satisfied:
1.) The form of the transaction is an _________.
2.) Both the real property transferred and the real property received are held either for ______________ or for _____________.
3.) The property is _______________ for domestic real estate.
- exchange
- productive use in a trade or business; investment
- domestic real estate
Only _________ real property qualifies for like-kind treatment.
domestic
_______is property received in an exchange that is not like-kind property
Boot
The receipt of boot will result in
1.) the __________of gain if there is a _________gain, or
2.) no recognition if there is a _________loss.
- recognition; realized
- realized
Exception: If the boot is appreciated or depreciated property, the gain or loss is recognized, to the extent of the difference between the _________and _________________ of the boot as though there had been a sale of the property used as boot.
- FMV
- adjusted basis
Boot includes the following:
1. ________
2. _________ assumed by the other party from the original taxpayer
3. other _________________ property, such as personal property received in an exchange involving real property
- Cash received
- Liabilities
- non-like-kind property
The basis of like-kind property received in the exchange is the property’s _________, less deferred gain or plus postponed loss, and is also called the property’s substituted basis.
FMV
If the exchange is with a related party, the taxpayer and related party must not dispose of real estate received in the exchange within a __________ period following the exchange. Exceptions include death and involuntary conversions.
two- year
The property to be received in an exchange must be identified in a written agreement within ________ after the transferred property is surrendered.
45 days
Property in the exchange must be received on or before the earlier of
1.) ________ after the transfer of the property given up, or
2.) the due date of the tax return (including extensions) for the year the property was given up.
- 180 days
The boot’s holding period starts from the ______________ and is not considered a carryover holding period.
date of exchange
Section 1033 allows a taxpayer who incurs an involuntary conversion to postpone recognition of gain realized from the conversion. Section 1033 applies only to _______, not ________.
- gains
- losses
If the amount reinvested in replacement property _______ or ________ the amount realized, the realized gain is not recognized.
- equals
- exceeds
Typically, the amount realized from the condemnation of property is equal to __________________ for the property. Severance damages are usually not included in the amount realized.
the amount received as compensation
The general requirement is that the replacement property is similar in service or use to the involuntarily converted property. For an owner-user, the _____________ test applies, and for an owner-investor, the ________________ test applies.
- functional use
- taxpayer use
Functional use test—The taxpayer’s use of the replacement property and of the involuntarily converted property must be ___________
the same
Taxpayer use test—The owner-investor’s properties must be used in _______________ as the previously held properties. This test is more flexible than the functional use test.
similar endeavors
Normally, the taxpayer has a ________ period from the end of the taxable year in
which any gain is realized from the involuntary conversion to replace the property. However, condemnation of real property used in a trade or business or held for investment has a ___________ period.
- two-year
- three-year
Section 121 gives a universal exclusion of up to __________ (married filing jointly, ___________) to any taxpayer who meets certain use tests.
- $250,000
- $500,000
A home must have been owned and used as a principal residence for at least ________ of the five years before the sale (do not have to be consecutive years).
two
Either spouse can meet the ______________ requirement, but both must meet the ______ requirement.
- ownership
- Use
When selling a personal residence, like any other personal asset, losses are not ___________
recognized
The Mortgage Forgiveness Debt Relief Act of 2007 allows a surviving single spouse to qualify for the up-to-$500,000 exclusion if the sale occurs no later than _______ years after the other spouse’s death, and the requirements for the $500,000 exclusion under Section 121 were met immediately before the spouse’s death.
two
