a
Introduction: When exchange of property takes place between taxpayers, the gain or loss on such exchange is
The recognized gain, if any, on the exchange.
b
Introduction:When exchange of property takes place between taxpayers, the gain or loss on such exchange is deferred for tax purposes. Under some situations for exchange of real property, the transactions may be non-taxable. To qualify for such non-taxability, the property must be sued in a trade or business or for investment.
The basis in the property received
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Chapter 8 Solutions
Income Tax Fundamentals 2020
- Mandy and Theo exchange real property in a like-kind exchange. Mandy receives real property with a fair market value of $76,800 and transfers real property worth $53,760 (adjusted basis of $37,632) and cash of $23,040. What is Mandy's realized and recognized gain? If an amount is zero, enter "0". Mandy's realized gain is $ and her recognized gain is $arrow_forwardJoe and John intend to enter into a like-kind exchange of real property qualifying for tax treatment under section 1031 of the Internal Revenue Code. Joe transfers land with a tax basis of $100,000 and fair market value of $400,000, subject to a mortgage of $100,000 to John. John transfers land worth $350,000 subject to a mortgage of $50,000. Please complete the following tables to compute Joe’s gain in the transaction and Joe’s basis in the property that he receives from John.arrow_forwardKaren purchased land valued at $100,000 with virtual currency she had been given by her father who purchased it for $60,000. The virtual currency had a value on the date of the gift equal to $85,000 (i.e., a taxable gift of $69,000) on which he paid a $17,940 gift tax. What income, if any, must Karen recognize as a result of her purchasearrow_forward
- In two unrelated transactions, Laura exchanges property that qualifies forlike-kind exchange treatment. In the first exchange, Laura gives up landpurchased in May 2017 (adjusted basis of $20,000; fair market value of $17,000) inexchange for a different parcel of land (fair market value of $15,000) and $2,000cash. In the second exchange, Laura receives a parking garage (to be used in herbusiness) with a fair market value of $50,000 in exchange for a plot of land she hadheld for investment. The land was purchased in April 2011 for $12,000 and has acurrent fair market value of $48,000. In addition to transferring the land, Laura paysan additional $2,000 to the other party.a. What is Laura’s adjusted basis for the new parcel of land?b. When does the holding period begin?c. What is Laura’s adjusted basis for the parking garage?d. When does the holding period begin?e. How could Laura structure either of the transactions differently to produce bettertax consequences?arrow_forwardA taxpayer exchanged land held for investment for another parcel of land. The transfer qualifies as a like kind exchange. The land had a basis of $330,000, a mortgage that will transfer with the land of $50,000, and a fair market value of $520,000. The taxpayer will be receiving a parcel of land with a fair market value of $430 000 and cash of $40,000. Calculate the taxpayer's recognized gain or loss on this transaction and his basis in the new parcel of land and place the answers below without $ signs or commas: Gain/Loss=? Basis=?arrow_forwardFred and Sarajane exchanged land in a qualifying like-kind exchange. Fred gives up land with an adjusted basis of $11,000 (fair market value of $16,000) in exchange for Sarajane's land with a fair market value of $12,000 plus $4,000 cash. How much gain should Fred recognize on the exchange? a.$4,000 b.$5,000 c.$0 d.$1,000 e.None of these choices are correctarrow_forward
- Frosty exchanges land used in her business for a different parcel of land to be used in her business. Her adjusted basis for the land is $325,000 and the fair market value is $310,000. The fair market value of the new parcel of land is $300,000. In addition, Frosty receives cash of $10,000. Calculate Frosty’s adjusted basis for the new parcel of land.arrow_forwardMaxine agrees to purchase Jacob's property utilizing a private annuity. Jacob's table life expectancy is ten years at the date of the agreement, and the property has a fair market value of $400,000. The private annuity payment is $45,000 per year, and Maxine dies after making two payments. At Maxine's death, what amount is included in her gross estate with regards to the private annuity and the transferred property? $0 $90,000 $310,000 $400,000arrow_forwardYour supervisor has asked you to research the following situation concerning Owen and Lisa Cordoncillo. Owen and Lisa are brother and sister. In May 2019, Owen and Lisa exchange land they both held separately for investment. Lisa gives up a two acre property in Texas with an adjusted basis of $2,000 and a fair market value of $6,000. In return for this property, Lisa receives from Owen a one acre property in Arkansas with a fair market value of $5,500 and cash of $500. Owen’s adjusted basis in the land he exchanges is $2,500. In March 2020, Owen sells the Texas land to a third party for $5,800. Required: Go to the IRS website (www.irs.gov). Locate and review Publication 544, Chapter 1, Nontaxable Exchanges. Please explain and calculate the amount of Owen and Lisa’s gain recognition for 2019. Also determine the effect, if any, of the subsequent sale in 2020.arrow_forward