25 May Question 1. If a taxpayer reinvests the net proceeds (amount received
Question
1. If a taxpayer reinvests the net proceeds (amount received – related expenses) received in an involuntary conversion in qualifying replacement property within the statutory time period, it is possible to defer the recognition of the realized gain.
a. True
b. False
2. The holding period of replacement property where the election to postpone gain is made includes the holding period of the involuntarily converted property.
a. True
b. False
.
3. A realized gain on an indirect (conversion into money) involuntary conversion of business property can be postponed, but a realized loss on an indirect involuntary conversion of business property cannotbe postponed.
a. True
b. False
4. Gil’s office building (basis of $225,000 and fair market value $275,000) is destroyed by a hurricane. Due to a 30% co-insurance clause, Gil receives insurance proceeds of $192,500 two months after the date of the loss. One month later, Gil uses the insurance proceeds to purchase a new office building for $275,000. His adjusted basis for the new building is $307,500 ($275,000 cost + $32,500 postponed loss).
a. True
b. False
5. Casualty losses and condemnation losses on the involuntary conversion of a personal residence receive the same tax treatment.
a. True
b. False
6. If the recognized gain on an involuntary conversion equals the realized gain because of a reinvestment deficiency, the basis of the replacement property will be more than its cost (cost plus realized gain).
a. True
b. False
7. If there is an involuntary conversion (i.e., casualty, theft, or condemnation) of the taxpayer’s principal residence, the realized gain may be postponed as a § 1033 involuntary conversion and/or excluded as a § 121 sale of a principal residence.
a. True
b. False
8. The taxpayer must elect to have the exclusion of gain under § 121 (sale of principal residence) apply.
a. True
b. False
9. At a particular point in time, a taxpayer can have two principal residences for § 121 exclusion purposes.
a. True
b. False
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