Question: John borrowed $4,500 to purchase a machine. He later borrowed $2,000 using the machine as collateral. Both notes are nonrecourse. Ten years later, the machine

John borrowed $4,500 to purchase a machine. He later borrowed $2,000 using the machine as collateral. Both notes are nonrecourse. Ten years later, the machine has an adjusted basis of zero and two outstanding not balances of $2,500 and $800. John sells the machine subject to the two liabilities for $1,000. What is his realized gain or loss?

a.

None of the above.
b.

$4,300
c.

$0.
d.

$3,300.
e.

$1,000.

10 points

QUESTION 2

Angelica purchases a house for $165,000. She converts the property to rental property when the fair market value is $140,000. After deducting depreciation (cost recovery) expense of $3,130, she sells the house for $100,000. What is her recognized gain or loss?

a.

($65,000).
b.

($36,870).
c.

None of the above.
d.

$0.
e.

($62,870).

10 points

QUESTION 3

Olivia and Matthew exchange real estate in a like-kind exchange. Olivia's basis in the real estate, subject to a $100,000 mortgage, is $250,000 and the fair market value is $400,000. She receives real estate with a fair market value of $300,000 and Matthew assumes the mortgage. What is Olivia's recognized gain and adjusted basis for the real estate received?

a.

None of the above.
b.

$50,000, $400,000.
c.

$100,000, $250,000.
d.

$100,000, $400,000.
e.

$0, $250,000.

10 points

QUESTION 4

On October 1, Denise exchanged an apartment building (adjusted basis of $575,000 and subject to a mortgage of $325,000) for another apartment building owned by Quinn (fair market value of $850,000 and subject to a mortgage of $325,000). The property transfers were made subject to the outstanding mortgages. What amount of gain should Denise recognize?

a.

$0.
b.

$50,000.
c.

None of the above.
d.

$225,000.
e.

$275,000.

10 points

QUESTION 5

Maple, Inc., owns a delivery truck which initially cost $40,000. After depreciation of $25,000 had been deducted, the truck was traded-in on a new truck that cost $50,000. Maple was required to pay the car dealer $20,000 in cash. What is Maple's basis for the new truck assuming the exchange qualifies for 1031 treatment?

a.

$0.
b.

$15,000.
c.

$35,000.
d.

$50,000.
e.

None of the above.

10 points

QUESTION 6

Miriam gifted property to her brother Aaron on January 25, 2016 at which time it had a fair market value of $35,000. Miriam had an adjusted basis in the property of $40,000. Assume that Aaron sold the property on June 20, 2016 for $90,000.

What amount should Aaron use for his basis?

a.

$90,000
b.

$40,000
c.

None of the above
d.

$0
e.

$35,000

10 points

QUESTION 7

Miriam gifted property to her brother Aaron on January 25, 2016 at which time it had a fair market value of $35,000. Miriam had an adjusted basis in the property of $40,000. Assume that Aaron sold the property on June 20, 2016 for $90,000.

What amount of gain/(loss) should Aaron recognize on the sale?

a.

None of the above
b.

$55,000
c.

$50,000
d.

$40,000
e.

$90,000

10 points

QUESTION 8

Miriam gifted property to her brother Aaron on January 25, 2016 at which time it had a fair market value of $35,000. Miriam had an adjusted basis in the property of $40,000.

What amount of gain/(loss) should Aaron recognize assuming he sold the property for $36,500 on 6/20/16?

a.

None of the above.
b.

$1,500 Short-term capital gain
c.

$0
d.

$3,500 Short-term capital loss
e.

$1,500 Long-term capital gain

10 points

QUESTION 9

Miriam gifted property to her brother Aaron on January 25, 2016 at which time it had a fair market value of $35,000. Miriam had acquired the property in 1988 and had an adjusted basis in the property of $40,000.

What amount of gain/(loss) should Aaron recognize assuming he sold the property for $30,000 on 6/20/16?

a.

($5,000) Short-term Loss.
b.

No Gain or Loss recognized.
c.

None of the above
d.

($10,000) Short-term Loss.
e.

($10,000) Long-term Loss.

10 points

QUESTION 10

Miriam gifted property to her brother Aaron on January 25, 2016 at which time it had a fair market value of $90,000. Miriam acquired the property in 1966 and had an adjusted basis in the property of $40,000.

What amount of gain/(loss) should Aaron recognize assuming he sold the property for $100,000 on 6/20/16?

a.

$10,000 Long-term capital gain.
b.

None of the above.
c.

$10,000 Short-term capital gain.
d.

$60,000 Long-term capital gain.
e.

$60,000 Short-term capital gain.

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