(1) Which one of the following statements is false? (2 points)

a. If insurance proceeds are received for property used in a trade or business, a casualty event

can result in recognized gain.

b. A realized gain on the sale or exchange of a personal use asset is usually recognized.

c. In calculating the adjusted basis of property, the basis is reduced by the lesser of the cost

recovery allowed or allowable.

d. The holding period of nontaxable stock rights includes the holding period of the stock on

which the rights were distributed.

(2) Which one of the following statements is true? (2 points)

a. Property received as a gift and then sold by the donee for an amount different from basis

might result in neither recognized gain nor recognized loss.

b. The holding period for property acquired by gift always begins on the date the donor

acquired the property.

c. The basis of property received by inheritance is usually a carryover basis.

d. A loss from the sale of a personal use asset that would be disallowed can be recognized if

the taxpayer converts the asset to business use prior to its sale.

(3) Which one of the following statements is true? (2 points)

a. Under no circumstances is a loss ever recognized in a Section 1031 transaction.

b. If appreciated property is given as boot in a Section 1031 transaction, gain is recognized to

the extent of the appreciation on the boot regardless of the amount of the realized gain on

the exchange.

c. The basis of boot received in a like-kind exchange is its fair market value minus any

postponed gain or plus any postponed loss.

d. In a Section 1031 transaction, when the other party assumes the taxpayers mortgage,

the taxpayer has given boot.

(4) Which one of the following statements is true? (2 points)

a. Under Section 1033, a realized gain or loss can be postponed.

b. The requirements for replacement property under Section 1033 are generally less

restrictive than the requirements for like-kind property under Section 1031.

c. If a loss occurs on an involuntary conversion, the holding period of the replacement

property does not include the holding period of the converted property.

d. If the recognized gain on an involuntary conversion equals the realized gain because of a

reinvestment deficiency, the basis of the replacement property will be less than its cost.

(5) Which one of the following statements is true? (2 points)

a. An accrual basis taxpayer accepts a note receivable from a retail customer with a weak

credit rating. The taxpayer immediately sells the note to a bank for less than the notes

stated value. The taxpayer has a short-term capital loss.

b, A university professor writes a mystery novel and publishes it at his own expense. Several

years later, a national publishing company buys the copyright to the book for $345,000.

The professor has a long-term capital gain.

c. A franchise transfer is generally a sale or exchange of a capital asset.

d. Both C corporations and individuals net together their capital gains and losses.

(6) Which one of the following statements is true? (2 points)

a. Section 1231 applies to the sale or exchange of business properties but not to any

involuntary conversions.

b. If there is net Section 1231 loss, it is treated as a short-term capital loss.

c, Personal use property casualty gains and losses are not subject to the Section 1231 rules.

d. Section 1231 property includes non-personal use property where casualty losses exceed

casualty gains for the tax year.