Question 1. Molly exchanges a small machine (adjusted basis of $8

1. Molly exchanges a small machine (adjusted basis of $85,000; fair market value of $78,000) used in her business and investment land (adjusted basis of $10,000; fair market value of $15,000) for a large machine (fair market value of $93,000) to be used in her business in a like­kind exchange. What is Molly’s recognized gain or loss?

a. $0.

b. $5,000.

c. ($2,000).

d. ($7,000).

e. None of the above.

2. In October 2014, Ben and Jerry exchange investment realty in a § 1031 like­kind exchange. Ben bought his real estate in 2004 while Jerry purchased his in 2007. In addition to the realty, Ben receives Pearl, Inc. stock worth $10,000 from Jerry. Ben’s realized gain is $30,000. On what date does the holding period for Ben’s realty received from Jerry begin? When does the holding period for the stock he receives begin?

a. 2004, 2014.

b. 2004, 2004.

c. 2007, 2007.

d. 2007, 2014.

e. None of the above.

3. Dena owns 500 acres of farm land in southeastern Maryland. Her adjusted basis for the land is $480,000 and there is a $400,000 mortgage on the land. She exchanges the land for an office building owned by Chris in Newark, New Jersey. The building has a fair market value of $900,000. Chris assumes Dena’s mortgage on the land. What is the amount of Dena’s recognized gain or loss on the exchange?

a. $0.

b. $400,000.

c. $500,000.

d. $820,000.

e. None of the above.

4. On October 1, Paula exchanged an apartment building (adjusted basis of $375,000 and subject to a mortgage of $125,000) for another apartment building owned by Nick (fair market value of $550,000 and subject to a mortgage of $125,000). The property transfers were made subject to the mortgages. What amount of gain should Paula recognize?

a. $0.

b. $25,000.

c. $125,000.

d. $175,000.

e. None of the above.

5. Nancy and Tonya exchanged assets. Nancy gave Tonya her personal residence with an adjusted basis of $280,000 and a fair market value of $560,000. The house has a mortgage of $200,000 which is assumed by Tonya. Tonya gave Nancy a yacht used in her business with an adjusted basis of $250,000 and a fair market value of $360,000. What is Tonya’s realized and recognized gain?

a. $310,000 realized and $310,000 recognized gain.

b. $310,000 realized and $0 recognized gain.

c. $110,000 realized and $110,000 recognized gain.

d. $110,000 realized and $0 recognized gain.

e. None of the above.

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