1) A client owns an apartment building with a fair market value of $250,000, an adjusted basis of $175,000 and a mortgage of $150,000. The client exchanges the building and $40,000 cash for a different apartment that has a fair market value of $220,000. The client assumes the $80,000 mortgage on the building to be acquired.
Which tax amount will the client realize as a result of the exchange ?
$30,000 gain
$45,000 gain
$75,000 gain
$0 gain or loss
2) What is the first taxable year in which any part of the gain on an involuntary conversion is realized?
The year in which the replacement property is purchased.
The year in which the replacement property is resold.
The year in which the insurance proceeds are received.
The year in which the involuntary conversion took place.
3) A taxpayer occupied a primary residence for nine months and then sold the residence. Which qualification is needed to exclude gain from taxable income?
Taxpayer moved due to taxpayer's new job that is 40 miles from the previous residence.
Taxpayer moved because of taxpayer's divorce.
Taxpayer moved because of noise from nearby racetrack.
Taxpayer moved to a different state to care for recently injured friend.
4) A taxpayer perform legal services (fair market value of $50,000) to a corporation in exchange for 10% of its stock (fair market of $70,000). What is the immediate tax consequence to the taxpayer?
Recognize $20,000 gain.
Recognize $50,000 of ordinary income
Recognize $70,000 of ordinary income
Recognize $20,000 loss