Category: Writing

Sale of a Principal Residence. Mr. and Mrs. Kitchens
purchased their first home in Ohio for $135,000 on October 1, 2018. Because Mr.
Kitchens’ employer transferred him to Utah, they sold the house for $160,000 on
January 10, 2019. How much of the gain is recognized?

Involuntary Conversion of Principal Residence. Mr. and Mrs.
Snell own and live in a house, with an adjusted basis of $300,000, char was
purchased in 1995. The house is destroyed by a tornado on March 10 of the
current year, and the Snells receive insurance proceeds of $410,000. They
purchase another residence for $480,000 four months lacer.
a. May they exclude the $110,000 gain, and if so, what is
the basis of the residence purchased in July?
b. May they defer the $110,000 gain, and if so, what is the
basis of the residence purchased in July?

Like-Kind Property. Which of the following exchanges qualify
as like-kind exchanges
under Sec. 1031?
a. A motel in Texas for a motel in Italy
b. An office building held for investment for an airplane to
be used in the taxpayer’s
business
c. Land held for investment for marketable securities held
for investment
d. Land held for investment for a farm co be used in the
taxpa yer’s business

Like-Kind Property. Which of the following exchanges qualify
as like-kind exchanges
under Sec. 1031?
a. Acme Corporation stock held for investment purposes for
Mesa Corporation stock
also held for investment purposes
b. A motel used in a trade or business for an apartment
complex held for investment
c. A pecan orchard in Texas used in a trade or business for
an orange grove in Florida
used in a trade or business
d. A one-third interest in a general partnership for a
one-fourth interest in a limited
partnership
e. Inventory for equipment used in a trade or business
f. Unimproved land held as an investment for a warehouse
used in a trade or business
g. An automobile used as a personal -use asset for
marketable securities held for investment

Chauvin Housing Corporat ion operates primarily in the
United States and owns a large houseboat that can provide sleeping accommodat
ions for as many as ninety ind ividuals. Chauvin is considering a possible
exchange of its houseboat, with an adjusted basis of $3,000,000, for a new
houseboat with a FMV of $7,000,000. Chauv in will also need to pay $1,200,000
cash . Chauvin is considering the possible relocation of the houseboat to
Finland . What tax issues should Chauvin consider?

Steve maintains that the cost of wallpaper ing his three
-bedroom house is a capita l expenditure wh ile Martha maintains that the cost
of wallpa – pering her three-bedroom house is an expense. Steve uses his house
as his persona l residence wh ile Martha’s house is renta l property. Explain
why Steve and Martha view the cost of wallpa – pering differently.

1.When may a sale of real property and a subsequent purchase
of real property be created as a like-kind exchange?
2. When determining whether property qualifies as like-kind
property, is the quality or grade of the property considered?
3. When does a nonsimulcaneous exchange qualify as a
like-kind exchange?

Kay owns real property used in her business and
exchanges the property for ocher like-kind real
property and marketable securities.
a. Will Kay’s recognized gain ever exceed the realized gain?
b. Will Kay’s recognized gain ever exceed the
FMV of the marketable securities?
c. What is the basis of the marketable securities
received?
d. When does the holding period of the market –
able securities begin?

Debbie owns a building with a basis of $300,000
and a holding period starting on May 10, 2007.
Debbie exchanges the building for a building
owned by Doug on July 23, 2019. Doug’s build –
ing has a FMV of $500,000. Both Debbie and
Doug use the building in their businesses.
a. What is Debbie’s basis for the building received
in the exchange and when does the holding period start for
chat building?
b. If Debbie and Doug are related taxpayers,
explain what action could occur that would
cause the exchange not to qualify as a like-kind
exchange.