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PLEASE ENTER ALL ANSWERS ON THE ANSWER SHEET. PARTI: TRUE FALSE Questions through 10 are True False questions. Enter the best answer onto the Answer sheet (1 point cach for a total of 10 points) 1. A gain from the sale of a principal residence may not be recognized. Tv V2. The term "like-kind" refers to the nature or character of property, not its grade or quality. TRUG 13. Receipt of boot in a like kind exchange may cause the recognition of gain. TEFAL V4. Investment property can be exchanged for business property in a like-kind exchange. Te 5. A realized loss from involuntary conversion will always be recognized. ALSO 6. The basis of gift property to a donee is generally the transferred basis of the donor. TNU 7. Generally speaking, a sale of a personal use asset cannot result in a deductible loss. True V 8. The basis of property is increased by capital returns and decreased by capital expenditures. PALSC 19. Not all realized gains and losses are recognized. FALSE 10. The amount realized from a sale includes the amount of liabilities from which the seller is relieved. Tour PART II SHORT ANSWER MULTIPLE CHOICE Questions through 30 are short answer/multiple choice questions. 3 points each for a total of 90 points) VI. In June of 2020. Jim gave Charles a painting. On the day of the gift, the painting had an adjusted basis of $20,000.00 and a FMV of $15,000.00. What is Charles gain/loss if he sells the painting in 2021 for $10,000.00? 2. Gina, who is single, sells her principal residence, which she owned and occupied for 8 years for $375,000. Her adjusted basis in the residence is $125,000, the selling expenses are $30,000, and repairs to make the house more marketable are $10,000. What is her recognized gain presuming that she made the appropriate election under Section 1212 3. If the taxpayer who qualifies under Section 1033 (nonrecognition of gain from an involuntary conversion), makes the appropriate election, and the amount reinvested in replacement property is less than amount realized, realized gain is: Recognized to the extent of the deficiency b. Recognized to the extent of the realized gain. Recognized to the extent of the amount reinvested. Permanently not subject to taxation. None of the above tinktion 4. Martha gives 100 shares of Green stock with an adjusted basis of $5,000.00 and my of $17,000.00 to her niece, Jennifer. Fourteen months after the date of the gift, Jennifer is killed in an automobile accident. Martha inherits the stock which is then worth $29,000,00. What is the adjusted basis of the inherited stock to Martha? 5. Doug received a summer home from his father as a gift in 2021. The fmv at the time of the gift was $90,000.00 and it had an adjusted basis to the father of $50,000.00 What is Douglas's basis in the gift property? 6. Taxpayer exchanges a rental house at the beach with an adjusted basis of $150,000.00 and a fmy of $200,000.00 for a rental house at the mountains with a fmv of $190,000.00 and cash of $10,000.00. What is the recognized gain or loss? 7. Jennifer inherited property from her mom. The property had an adjusted basis of $20,000.00 and FMV of $40,000.00 on the date of her mom's death. What is Jennifer's basis in the inheritance.? Questions through 15 pertain to the following facts. Suppose a like kind exchange takes place on October 27, 2021. C gives D property which is a capital asset purchased on April 9, 2011. D gives C property which is a capital property purchased on March 21, 2013. C give property with FMV: S 200 Basis: S100 D give to property with FMV: Basis: S250 S 70 8. What is D's realized gain? 9. What is D's recognized gain? 10. What is D's basis in the property received? 11. When does D's holding period begin? 12. What is C's realized gain? 13. What is C's recognized gain? 14. What is C's basis in the property received? 15. When does C's holding period begin? Questions 16 through 18 pertain to the following facts. Mr. Smith's business warehouse was demolished by a tornado on August 10, 2018 On November 14, 2019. Mr. Smith received $90,000.00 in insurance proceeds covering the damage to the warchouse. Mr. Smith's basis in the warehouse was $50,000.00. He purchased a new warehouse on February 5. 2021 for $70,000.00 16. What is the latest date for Mr. Smith to make an election under S1033 and defer recognition of the gain? 17. If Mr. Smith makes the proper election pursuant to Code F1033, what is Mr. Smith's recognized gain? 18. What is Mr. Smith's basis in the new warehouse? 19. Alicia buys a beach house for $300,000 which she uses as her personal vacation home. She builds an additional room on the house for $25,000. She sells the property for $600,000 and pays $20,000 in legal fees in connection with the sale. What is her recognized gain or loss on the sale of the house? 20. Kent gave Larry a gift having a fair market value of $133,000.00 on February 14, 2020. Kent had purchased the gift property in 2019 for $153,000.00. Larry sold the gift on February 20, 2021 for $145,000. What is Larry's gain? 21. At a graduation present Barbara received 1,000.00 shares of stock from her aunt. The stock has a fmv of $25,000.00 at the time of the gift. The aunt's adjusted basis in the stock at the time of the gift was $30,000.00. What is Barbara's gain/loss if she sold the stock for $20,000.00 22. Albert purchased a tract of land for $140,000 in 2015 when he heard a new highway was going to be constructed through the property and that the land would soon be worth $200,000. Highway engineers surveyed the property and indicated that he would probably get $180,000. The highway project was abandoned in 2021 and the value of the land fell to $100,000. What is the amount of loss Albert can claim in 2021? 23. In order to qualify for a like-kind exchange under Section 1031, which of the following requirements must be met? a. The form of the transaction is an exchange. b. Both the property transferred and the property received are held either for productive use in a trade or business or for investment c. The exchange must be contain foreign real estate. d. Only a and b e. a, b, and c 24. 25. Larry gave Michelle a piece of property that had a FMV = $500 and an A/B - $1,000.00 on a the date of the gift in 2021. One year later, Michelle sold the property for $300.00. What is Michelle's realized gain or loss on the sale? Scott is single and owned a piece of property. He bought it in 2018 for $300,000.00 and sold it in 2021 for $675,000.00. What is Scott's realized gain? Bluff purchased property for business use for $35,000.00 and made $1,000.00 of capital improvements to the equipment. What is Bluff's basis in the property? 26. 27. Mr. Pine purchased a small office building. Included in his costs were the following: Cash down payment Mortgage on property assumed Title insurance $50,000.00 $300,000.00 $2,000.00 What is Mr. Pine's basis in the property? Questions 28 through 30 pertain to the following facts. Leonard and Linda Lindsay sold for $350,000 in October 2019 their residence that they purchased in 2009 for $100,000. They made major capital improvements during their 10- year ownership totaling $30,000. 28. What is their excluded gain? How much must they recognize? 29. Suppose that the Lindsays sold their home for $700,000. They moved into a smaller home costing $200,000. What is their excluded gain? How much must they recognize? 30. Assume instead that the Lindsays resided in a very depressed neighborhood and the home was sold for only $80,000. How much gain or loss is recognized? PLEASE ENTER ALL ANSWERS ON THE ANSWER SHEET. PARTI: TRUE FALSE Questions through 10 are True False questions. Enter the best answer onto the Answer sheet (1 point cach for a total of 10 points) 1. A gain from the sale of a principal residence may not be recognized. Tv V2. The term "like-kind" refers to the nature or character of property, not its grade or quality. TRUG 13. Receipt of boot in a like kind exchange may cause the recognition of gain. TEFAL V4. Investment property can be exchanged for business property in a like-kind exchange. Te 5. A realized loss from involuntary conversion will always be recognized. ALSO 6. The basis of gift property to a donee is generally the transferred basis of the donor. TNU 7. Generally speaking, a sale of a personal use asset cannot result in a deductible loss. True V 8. The basis of property is increased by capital returns and decreased by capital expenditures. PALSC 19. Not all realized gains and losses are recognized. FALSE 10. The amount realized from a sale includes the amount of liabilities from which the seller is relieved. Tour PART II SHORT ANSWER MULTIPLE CHOICE Questions through 30 are short answer/multiple choice questions. 3 points each for a total of 90 points) VI. In June of 2020. Jim gave Charles a painting. On the day of the gift, the painting had an adjusted basis of $20,000.00 and a FMV of $15,000.00. What is Charles gain/loss if he sells the painting in 2021 for $10,000.00? 2. Gina, who is single, sells her principal residence, which she owned and occupied for 8 years for $375,000. Her adjusted basis in the residence is $125,000, the selling expenses are $30,000, and repairs to make the house more marketable are $10,000. What is her recognized gain presuming that she made the appropriate election under Section 1212 3. If the taxpayer who qualifies under Section 1033 (nonrecognition of gain from an involuntary conversion), makes the appropriate election, and the amount reinvested in replacement property is less than amount realized, realized gain is: Recognized to the extent of the deficiency b. Recognized to the extent of the realized gain. Recognized to the extent of the amount reinvested. Permanently not subject to taxation. None of the above tinktion 4. Martha gives 100 shares of Green stock with an adjusted basis of $5,000.00 and my of $17,000.00 to her niece, Jennifer. Fourteen months after the date of the gift, Jennifer is killed in an automobile accident. Martha inherits the stock which is then worth $29,000,00. What is the adjusted basis of the inherited stock to Martha? 5. Doug received a summer home from his father as a gift in 2021. The fmv at the time of the gift was $90,000.00 and it had an adjusted basis to the father of $50,000.00 What is Douglas's basis in the gift property? 6. Taxpayer exchanges a rental house at the beach with an adjusted basis of $150,000.00 and a fmy of $200,000.00 for a rental house at the mountains with a fmv of $190,000.00 and cash of $10,000.00. What is the recognized gain or loss? 7. Jennifer inherited property from her mom. The property had an adjusted basis of $20,000.00 and FMV of $40,000.00 on the date of her mom's death. What is Jennifer's basis in the inheritance.? Questions through 15 pertain to the following facts. Suppose a like kind exchange takes place on October 27, 2021. C gives D property which is a capital asset purchased on April 9, 2011. D gives C property which is a capital property purchased on March 21, 2013. C give property with FMV: S 200 Basis: S100 D give to property with FMV: Basis: S250 S 70 8. What is D's realized gain? 9. What is D's recognized gain? 10. What is D's basis in the property received? 11. When does D's holding period begin? 12. What is C's realized gain? 13. What is C's recognized gain? 14. What is C's basis in the property received? 15. When does C's holding period begin? Questions 16 through 18 pertain to the following facts. Mr. Smith's business warehouse was demolished by a tornado on August 10, 2018 On November 14, 2019. Mr. Smith received $90,000.00 in insurance proceeds covering the damage to the warchouse. Mr. Smith's basis in the warehouse was $50,000.00. He purchased a new warehouse on February 5. 2021 for $70,000.00 16. What is the latest date for Mr. Smith to make an election under S1033 and defer recognition of the gain? 17. If Mr. Smith makes the proper election pursuant to Code F1033, what is Mr. Smith's recognized gain? 18. What is Mr. Smith's basis in the new warehouse? 19. Alicia buys a beach house for $300,000 which she uses as her personal vacation home. She builds an additional room on the house for $25,000. She sells the property for $600,000 and pays $20,000 in legal fees in connection with the sale. What is her recognized gain or loss on the sale of the house? 20. Kent gave Larry a gift having a fair market value of $133,000.00 on February 14, 2020. Kent had purchased the gift property in 2019 for $153,000.00. Larry sold the gift on February 20, 2021 for $145,000. What is Larry's gain? 21. At a graduation present Barbara received 1,000.00 shares of stock from her aunt. The stock has a fmv of $25,000.00 at the time of the gift. The aunt's adjusted basis in the stock at the time of the gift was $30,000.00. What is Barbara's gain/loss if she sold the stock for $20,000.00 22. Albert purchased a tract of land for $140,000 in 2015 when he heard a new highway was going to be constructed through the property and that the land would soon be worth $200,000. Highway engineers surveyed the property and indicated that he would probably get $180,000. The highway project was abandoned in 2021 and the value of the land fell to $100,000. What is the amount of loss Albert can claim in 2021? 23. In order to qualify for a like-kind exchange under Section 1031, which of the following requirements must be met? a. The form of the transaction is an exchange. b. Both the property transferred and the property received are held either for productive use in a trade or business or for investment c. The exchange must be contain foreign real estate. d. Only a and b e. a, b, and c 24. 25. Larry gave Michelle a piece of property that had a FMV = $500 and an A/B - $1,000.00 on a the date of the gift in 2021. One year later, Michelle sold the property for $300.00. What is Michelle's realized gain or loss on the sale? Scott is single and owned a piece of property. He bought it in 2018 for $300,000.00 and sold it in 2021 for $675,000.00. What is Scott's realized gain? Bluff purchased property for business use for $35,000.00 and made $1,000.00 of capital improvements to the equipment. What is Bluff's basis in the property? 26. 27. Mr. Pine purchased a small office building. Included in his costs were the following: Cash down payment Mortgage on property assumed Title insurance $50,000.00 $300,000.00 $2,000.00 What is Mr. Pine's basis in the property? Questions 28 through 30 pertain to the following facts. Leonard and Linda Lindsay sold for $350,000 in October 2019 their residence that they purchased in 2009 for $100,000. They made major capital improvements during their 10- year ownership totaling $30,000. 28. What is their excluded gain? How much must they recognize? 29. Suppose that the Lindsays sold their home for $700,000. They moved into a smaller home costing $200,000. What is their excluded gain? How much must they recognize? 30. Assume instead that the Lindsays resided in a very depressed neighborhood and the home was sold for only $80,000. How much gain or loss is recognized