Question 1. Which, if any, of the following exchanges qualifies for nonrecognition treatment

1. Which, if any, of the following exchanges qualifies for nonrecognition treatment as a § 1031 like-kind exchange?

a. Partnership interest for a partnership interest.

b. Inventory for inventory.

c. Securities for personalty.

d. Business realty for investment realty.

e. None of the above.

2. Brett owns investment land located in Tucson, Arizona. He exchanges it for other investment land. In which of the following locations may the other investment land be located and enable Brett to qualify for § 1031 like­kind exchange treatment?

a. Mexico City, Mexico.

b. Toronto, Canada.

c. Paris, France.

d. Only a. and b.

e. None of the above.

3. Lily exchanges a building she uses in her rental business for a building owned by Kendall, which she will use in her rental business. The adjusted basis of Lily’s building is $120,000 and the fair market value is $170,000. Which of the following statements is correct?

a. Lily’s recognized gain is $50,000 and her basis for the building received is $120,000.

b. Lily’s recognized gain is $50,000 and her basis for the building received is $170,000.

c. Lily’s recognized gain is $0 and her basis for the building received is $120,000.

d. Lily’s recognized gain is $0 and her basis for the building received is $170,000.

e. None of the above is correct.

4. Latisha owns a warehouse with an adjusted basis of $200,000. She exchanges it for a strip mall building worth $225,000. Which of the following statements is correct?

a. If the warehouse was used in Latisha’s business to store inventory and the strip mall building is to be rented to tenants, her recognized gain is $25,000 and her basis for the strip mall building is $225,000.

b. If the warehouse was used in Latisha’s business to store inventory and the strip mall building is to be used as a retail outlet for her business, her recognized gain is $0 and her basis for the strip mall building is $200,000.

c. If the warehouse is used by Latisha to store personal use items such as excess furniture and the strip mall building is to be rented to tenants, her recognized gain is $25,000 and her basis for the strip mall building is $225,000.

d. Only b. and c. are correct.

e. a., b., and c. are correct.

5. Which of the following statements is correct?

a. The receipt of boot in a § 1031 like­kind exchange can result in the recognition of gain.

b. The receipt of boot in a § 1031 like­kind exchange cannot result in the recognition of loss.

c. The giving of boot in a § 1031 like­kind exchange can result in the recognition of gain.

d. Only a. and b.

e. a., b., and c.

6. Bud exchanges a business use machine with an adjusted basis of $22,000 and a fair market value of $30,000 for another business use machine with a fair market value of $28,000 and $2,000 cash. What is Bud’s recognized gain or loss?

a. $0.

b. $2,000.

c. $6,000.

d. $8,000.

e. None of the above.

7. Maud exchanges a rental house at the beach with an adjusted basis of $225,000 and a fair market value of $200,000 for a rental house at the mountains with a fair market value of $180,000 and cash of $20,000. What is the recognized gain or loss?

a. $0.

b. $20,000.

c. ($20,000).

d. ($25,000).

e. None of the above.

8. Melvin receives stock as a gift from his uncle. No gift tax is paid. The adjusted basis of the stock is $30,000 and the fair market value is $38,000. Melvin trades the stock for bonds with a fair market value of $35,000 and $3,000 cash. What is his recognized gain and the basis for the bonds?

a. $0, $30,000.

b. $5,000, $33,000.

c. $5,000, $30,000.

d. $8,000, $33,000.

e. None of the above.

9. Moss exchanges a warehouse for a building he will use as an office building. The adjusted basis of the warehouse is $600,000 and the fair market value of the office building is $350,000. In addition, Moss receives cash of $150,000. What is the recognized gain or loss and the basis of the office building?

a. $0 and $350,000.

b. $0 and $450,000.

c. ($150,000) and $300,000.

d. ($200,000) and $350,000.

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