Property Transactions - Nontaxable Exchanges

Question 1

In a nontaxable exchange, realized gains or losses are not recognized, except to the extent of ___________ in the transaction

Answer 1

boot received

Question 2

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.

Answer 2

1. exchange
2. productive use in a trade or business; investment
3. domestic real estate

Question 3

Only _________ real property qualifies for like-kind treatment.

Answer 3

domestic

Question 4

_______is property received in an exchange that is not like-kind property

Answer 4

Boot

Question 5

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.

Answer 5

1. recognition; realized
2. realized

Question 6

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.

Answer 6

1. FMV
2. adjusted basis

Question 7

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

Answer 7

1. Cash received
2. Liabilities
3. non-like-kind property

Question 8

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.

Answer 8

FMV

Question 9

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.

Answer 9

two- year

Question 10

The property to be received in an exchange must be identified in a written agreement within ________ after the transferred property is surrendered.

Answer 10

45 days

Question 11

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.

Answer 11

1. 180 days

Question 12

The boot’s holding period starts from the ______________ and is not considered a carryover holding period.

Answer 12

date of exchange

Question 13

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 ________.

Answer 13

1. gains
2. losses

Question 14

If the amount reinvested in replacement property _______ or ________ the amount realized, the realized gain is not recognized.

Answer 14

1. equals
2. exceeds

Question 15

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.

Answer 15

the amount received as compensation

Question 16

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.

Answer 16

1. functional use
2. taxpayer use

Question 17

Functional use test—The taxpayer’s use of the replacement property and of the involuntarily converted property must be ___________

Answer 17

the same

Question 18

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.

Answer 18

similar endeavors

Question 19

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.

Answer 19

1. two-year
2. three-year

Question 20

Section 121 gives a universal exclusion of up to __________ (married filing jointly, ___________) to any taxpayer who meets certain use tests.

Answer 20

1. $250,000
2. $500,000

Question 21

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).

Answer 21

two

Question 22

Either spouse can meet the ______________ requirement, but both must meet the ______ requirement.

Answer 22

1. ownership
2. Use

Question 23

When selling a personal residence, like any other personal asset, losses are not ___________

Answer 23

recognized

Question 24

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.

Answer 24

two