Question

1. Jane owns a building for investment with an adjusted basis of $340,000 and a fair market value of $750,000. She exchanges the building for a building owned by Sue that Jane will use in her business. Sue’s building has a fair market value of $950,000 and is subject to a $200,000 liability. Jane assumes Sue’s liability and uses the building in her business. How much, if any, is Jane’s realized gain, recognized gain, and basis in the building received?

a. Gain realized of $610,000, gain recognized of 0, and basis in new building of $340,000

b. Gain realized of $610,000, gain recognized of $610,000, and basis in new building of $750,000

c. Gain realized of $410,000, gain recognized of 0, and basis in building of $540,000

d. Gain realized of $410,000, gain recognized of $410,000, and basis of $750,000

2. On September 20, 2017, Greg entered into an agreement to exchange an eight-unit rental apartment building for a four-unit rental apartment building. The closing took place on October 20, 2017 at which time the transfers were completed. Greg’s adjusted basis for the eight-unit building was $320,000 and the fair market value was $400,000. The fair market value of the four-unit building, which was subject to a $40,000 mortgage, was $440,000 on the date of the transaction. What, if any, is Greg’s taxable gain?

a.             $120,000

b.             $80,000

c.             $48,000

d.             $40,000

e.             $0

3.          On September 20, 2017, Greg entered into an agreement to exchange an eight-unit rental apartment building for a four-unit rental apartment building. The closing took place on October 20, 2017 at which time the transfers were completed. Greg’s adjusted basis for the eight-unit building was $320,000 and the fair market value was $400,000. The fair market value of the four-unit building, which was subject to a $40,000 mortgage, was $440,000 on the date of the transaction, and had an adjusted basis to the owner, Tom, of $420,000. What is Greg’s basis in the eight-unit building?

$320,000

$360,000

$400,000

$420,000

4.          Gain, in certain cases, may be treated as capital gain in which of the following situations?

a.             Upon recognition of a nonbusiness bad debt

b.             Upon the sale of inventory

c.             On the sale of Section 1231 property

d.             In none of the above situations

Answer 1