Chapter 11 (The following questions are based on the Year 2021 rule)

13. Brian Bush and Charles Chex exchange business machines. Brian gives Charles a machine with a basis of $3,500 (fair market value $3,000) plus $2,000 in cash. Charles gives Brian a machine with a basis of $4,000 and a fair market value of $5,000. What is Charles's recognized gain?

a.$2,000

b.$500

c.$1,000

d.$0

14. David Drummond and Edward Engels exchange business cars. David gives Edward a car with a basis of $17,500 and a fair market value of $21,500. David receives from Edward a car with a basis of $12,500 (fair market value of $17,000) and $4,500 cash. What is David's basis in the new car?

a.$21,500

b.$17,000

c.$12,500

d.$15,000

15. Real property where Paul Peterson's warehouse is located is condemned by the public authorities on November 23, 2019. Paul purchased the warehouse in 2011 for $800,000, and the warehouse had and adjusted basis of $420,000 and a fair market value of $1 million. He receives $1 million from the public authorities on March 5, 2020. Paul reinvests $950,000 in qualified replacement property. How much gain is recognized by Paul?

a. $420,000.

b. $50,000.

c. $580,000.

d. $1,000,000.

e. $950,000

16. Which of the following is not an example of a nontaxable like-kind exchange?

a.Improved real estate for unimproved real estate.

b.Inventory for common stock.

c.The trade of an apartment building for a store building.

d.Real estate for a ranch.