1. Jim owns an apartment building with a fair market value of $225,000 and an adjusted basis of $85,000. He wants to acquire Frank's duplex, which has a fair market value of $200,000 and an adjusted basis of $130,000. In the exchange, Jim will also receive $25,000 in cash from Frank. Which of the following statements is correct with regard to recognition of gain in the like-kind exchange?

1. Jim recognizes a $140,000 gain.
2. Frank recognizes a $25,000 gain.
3. Neither recognizes a gain.
4. Jim recognizes a $25,000 gain.

2. Mr. Johnson is 65 and about to begin receiving payments from a deferred annuity he purchased many years ago. His investment in the contract is $108,000. He is to receive $1000 per month for the rest of his life. His current life expectancy, based on IRS tables, is 15 years.

What amount, if any, of each monthly payment is tax free to Derrick?

1. $7200
2. $0
3. $4800
4. $600
5. $400

3. The substitute basis of a qualifying asset received in a like-kind exchange is:
1. The replacement assets basis carries over to the newly acquired asset in the transaction.
2. The replacement assets basis carries over from the old owner to the new owner.
3. The replacement assets fair market value increased by the gain deferred in the transaction.
4. None of the answer choices

4. Paul was divorced from his wife, Patricia late last year. As part of the property settlement agreement, Paul agreed to transfer his interest in a residential real estate tract to Patricia. Pauls cost basis in the tract was $50,000. The property was appraised at a fair market value of $100,000 at the time of its transfer to Patricia.

Which one of the following income tax implications is true of Pauls transfer of the real estate to Patricia?

1. Paul must recognize the gain on the real estate at the time of transfer.
2. Pauls basis in the real estate is carried over to Patricia for income tax purposes.
3. Patricia receives a basis in the real estate equal to the fair market value at the time of transfer.
4. Paul is allowed a deduction equal to the excess of the fair market value over the basis in the property as alimony.

5. Roberto and Deanna live in Texas, a community property state. They purchased land as community property in 1985 for $60,000, each contributing $30,000. Deanna died and bequeathed her share of the land to Roberto. The land had a fair market value of $88,000 on Deannas date of death.

What is Roberto's total adjusted basis in the land after Deannas death?

1. $60,000
2. $148,000
3. $88,000
4. $44,000
5. $74,000