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Multiple Choice Quiz
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1
If an exchange of like-kind assets occurs, the taxpayer must follow the like-kind deferral of gain rules.
A)True
B)False
2
To qualify as a "like-kind" exchange, the property must be an exact duplicate.
A)True
B)False
3
A taxpayer must use all of the insurance proceeds from an involuntary conversion to be able to exclude any of the gain.
A)True
B)False
4
The installment method cannot be used by a dealer to report the gain from the sale of their inventory.
A)True
B)False
5
The gain on the sale of a personal residence is never taxed.
A)True
B)False
6
Which of the following qualify as "like-kind" property for purposes of an exchange?
A)A trade-in of a tractor for the tractor dealer.
B)Corporate bonds for different corporate bonds.
C)Land at the beach for an apartment building in town.
D)A business use delivery truck for a delivery van.
7
Keva exchanges a machine used in her business with Darla for another machine. The basis of Keva's old machine is $62,500, FMV is $82,500, and she gives Darla cash of $17,500. Darla's basis in her machine is $87,500 with FMV $100,000. Which of the following statements is correct?
A)Darla must recognize of $30,000 on the exchange.
B)Keva must recognize gain of $20,000 on the exchange.
C)Since this is a like-kind exchange, neither Keva nor Darla recognize any gain.
D)Darla must recognize $12,500 gain on the exchange.
8
Keva exchanges a machine used in her business with Darla for another machine. The basis of Keva's old machine is $62,500, FMV is $82,500, and she gives Darla cash of $17,500. Darla's basis in her machine is $87,500 with FMV $100,000. Keva's basis in her new equipment is:
A)a. $ 0.
B)$ 25,000.
C)$ 80,000.
D)$100,000.
9
Keva exchanges a machine used in her business with Darla for another machine. The basis of Keva's old machine is $62,500, FMV is $82,500, and she gives Darla cash of $17,500. Darla's basis in her machine is $87,500 with FMV $100,000. Darla's basis in her new equipment is:
A)a. $ 0.
B)$ 82,500.
C)$ 87,500.
D)$100,000.
10
An apartment complex with an adjusted basis of $187,500 was destroyed by a hurricane on October 1, 2007. On December 15, 2007, the insurance company paid the owner $292,500. The owner reinvested $255,000 in a new apartment complex. How much gain, if any, must be recognized assuming the involuntary conversion rules are met?
A)a. $ 0.
B)$ 37,500.
C)$105,000.
D)$255,000.
11
An apartment complex with an adjusted basis of $187,500 was destroyed by a hurricane on October 1, 2007. On December 15, 2007, the insurance company paid the owner $292,500. The owner reinvested $255,000 in a new apartment complex. What is the basis of the new apartment complex?
A)$150,000.
B)$187,500.
C)$255,000.
D)$292,500.
12
An office building with an adjusted basis of $500,000 was destroyed by a fire on July 4, 2007. On August 12, 2007, the insurance company paid the owner $790,000. The owner reinvested $940,000 in a new office building. What is the basis of the new building if nonrecognition of gain from an involuntary conversion is elected?
A)$210,000.
B)$500,000.
C)$650,000.
D)$790,000.
13
Byron owns a gas station with an adjusted basis of $415,000. The station was destroyed by a flood on September 17, 2007. Bryon received a check for $550,000 from his insurance company on December 15, 2007, compensating him for the damage to his station. What is the latest date Bryon can buy replacement property to avoid recognition of any realized gain?
A)September 17, 2009.
B)December 31, 2009.
C)February 15, 2010.
D)December 31, 2010.
14
On November 7, 2007, Ashton sold land held for investment to Bennet. Ashton's land had a basis of $440,000 and was subject to a mortgage of $110,000. Bennet paid Ashton $110,000 on the date of the sale, will assume the $110,000 mortgage, and will give Ashton a note for $660,000 (plus interest at the federal rate) due the following year. What are the contract price and gain recognized in the year of sale?
                                 Contract Price     Gain Recognized
A)$660,000           $55,000
B)$700,000           $110,000
C)$770,000           $47,080
D)$880,000           $410,000
15
A taxpayer who sells his or her personal residence in 2007 may exclude some or all of the gain on the sale if the residence was owned and lived in for:
A)At least three years before the sale date.
B)Any two years before the sale.
C)Any of the last fours years out of an eight year period before the sale.
D)At least two years within the last five years prior to the sale date.
16
Shelly and Bobby are married and 65 years old. They sell their personal residence to Terry for $800,000 cash. Shelly and Bobby purchased the house 30 years ago for $100,000. What amount of gain should Shelly and Bobby recognize on the sale?
A)$0.
B)$200,000.
C)$260,000.
D)$700,000.
17
Patrick, who is single, purchased a house on June 6, 1999 for $175,000. On June 15, 2007, Patrick sold the house for $390,000. Patrick paid a sales commission of $23,400 and legal fees of $750 connected with the sale of the house. What is Patrick's recognized gain on the sale of the house?
A)$0.
B)$ 15,000.
C)$190,850.
D)$215,000.
18
All of the following relationships are considered related parties except for:
A)A taxpayer and his sister.
B)A taxpayer and his wife's brother (brother-in-law).
C)A taxpayer and a corporation where the taxpayer owns 55% of the corporation's stock.
D)A taxpayer and a partnership where the taxpayer is a 80% partner in the partnership.
19
On October 1, 2007, Nick sells land (basis $110,000) to his brother Jake for $80,000, the land's fair market value on the date of the sale. On December 18, 2007, Jake sells the land to an unrelated party. Which of the following statements is correct?
A)If Jake sells the land for $70,000, he has a $40,000 recognized loss on the sale.
B)If Jake sells the land for $90,000, he has a $10,000 recognized gain on the sale.
C)If Jake sells the land for $130,000, he has a $50,000 recognized gain on the sale
D)If Jake sells the land for $114,000, he has a $4,000 recognized gain on the sale.
20
Wade owns 400 shares of Hot Sales Company stock that he purchased for $16,000 six years ago. On December 6, 2007, Bryce sold 200 shares of the stock for $5,000. On January 4, 2008, Bryce repurchased 100 shares for $2,200. How much of the loss can Wade deduct in 2007?
A)a. $ 0.
B)$ 1,500.
C)$ 8,800.
D)$11,000.





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