1. I.b. seller in 2010 sold farm land she held as an investment for $250,000. the land had an adjusted basis of $100,000 and was encumbered with a $50,000 mortgage which the buyer assumed. she incurred selling expenses of $10,000. the sales contract called a $50,000 down-payment at the date of sale and, beginning in 2010, $50,000 per year for the next three years, along with interest on the unpaid balance. Ms. seller elects to use the installment sales method to report the sale. her gross profit percentage is: a. 56% b. 30% c. 100% d. 70% 2. A nonrecourse liability is a liability is a liability for which: a. the debt holder can only look to the value of the property for payment if the owner cannot pay. b. the owner of the property is personally liable. c. any buyer of the property is personally liable. d. none of the above. 3. a corporations office building was destroyed by fire. which of the following is a qualified replacement? a. raw land to be used to construct houses. b. a warehouse c. rental farmland d. none of the above. 4. True or false: Sales of subdivided lots will not be subject to capital gains treatment is the lots are enhanced in value due to substantial improvements made to the tract of land by the taxpayer. 5. Lucy lived in a five-unit apartment building that she purchased in 1980 for $60,000. Lucy rented out the other four apartments in the building. Lucy had taken depreciation for $24,000 on the rented portion of the building. In 2002, she sold the building for $250,000 and purchased a new personal residence for $90,000. How much gain on the sale of the personal portion of her residence must lucy report on her 2002 tax return? no recognized gain b. c. d. 6. sold their personal residence in 2002 for $195,000 and rented an apartment. They are both 62 years old and neither one had previously excluded any portion of their gain on the sale of the personal residence. They had lived in the home for 25 years. They purchased it for $15,000, and they had added $30,000 in capital improvements. Selling expenses were $9,950. What is their recognized gain, if any? a. $0 b. $15,050 c. $25,000 d. $30,050 e. $45,050 7. Grotto, Inc. exchanged an eight unit apartment building for a four-unit apartment building. Grottos adjusted basis in the eight-unit building was $320,000 and its fair market value was $400,000. The four-unit building was worth $440,000 and was subject to a $40,000 mortgage, which Grotto assumed. grottos realized and recognized gain on the exchange are: a. 80,000 and $0 b. $40,000 and $0 c. $80,000 and $40,000 d. $0 and $0 8. Grotto, Inc. exchanged an eight unit apartment building for a four-unit apartment building. Grottos adjusted basis in the eight-unit building was $320,000 and its fair market value was $400,000. The four-unit building was worth $440,000 and was subject to a $40,000 mortgage, which Grotto assumed. Grottos basis in the four-unit building is: a. $320,000. b. $360,000. c. $400,000. d. $440,000. e. None of the above. 9. a warehouse is condemned by the state on april 27, 2011. the taxpayers basis in the warehouse is $200,000, its fair market value is $330,000. on july 28, 2011, the taxpayer purchases another warehouse across town for $275, 000. on aug 2, 2011, the government pays the taxpayer $330,000 for the condemned warehouse. the taxpayers basis in the new warehouse is: a. 200,000 b. 330,000 c. 245,000 d. 375,000 10. A warehouse is condemned by the state on april 27, 2011. the taxpayers basis in the warehouse is $200,000, and its fair market value is $330,000. on aug 2, 2011, the government pays the taxpayer $330,000 for the condemned warehouse. how long does the taxpayer have to acquire qualified replacement property? a. december 31, 2013 b. aug 2, 2013 c. dec 31, 2014 d. aug 2, 2014 e. april 27, 2013 11. which of the following statements regarding realized and recognized gains is correct? a. realized gains can never exceed recognized gains b. realized gains constitute the portion of recognized gains that are included in gross income c. in a tax-free exchange, realized gains are always zero. d. postponed or excluded gains are equal to the difference between realized gains and recognized gains. 12. which of the following statements regarding realized and recognized losses is incorrect? a. losses are never recognized in a tax-free exchange, provided that only cash and similar property are exchanged. b. recognized losses can never exceed realized losses. c. unrecognized (deferred) losses incurred in a tax-free exchange decrease the basis of the acquired property. D. all of the above are incorrect.
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