Questions from Federal Taxation

Q: Edith exchanges a machine used in her business for another machine and

Edith exchanges a machine used in her business for another machine and stock of Teal, Inc. If Edith had sold her machine, she would have had a realized gain. Explain why the new machine will have a di...

Q: Mortgaged real estate may be received in a like-kind exchange

Mortgaged real estate may be received in a like-kind exchange. If the taxpayer’s mortgage is assumed, what effect does the mortgage have on the recognition of realized gain? On the basis of the real e...

Q: Sheila’s appreciated property is involuntarily converted. She receives insurance proceeds equal

Sheila’s appreciated property is involuntarily converted. She receives insurance proceeds equal to the fair market value of the property. What is the minimum amount Sheila must reinvest in qualifying...

Q: Vera owns an office building that she leases to tenants. If

Vera owns an office building that she leases to tenants. If the building is destroyed by a tornado, is the functional use test or the taxpayer use test applied as to replacement property? Explain the...

Q: Ron sold his sailboat for a $5,000 loss in

Ron sold his sailboat for a $5,000 loss in the current year because he was diagnosed with skin cancer. His spouse wants him to sell his Harley Davidson motorcycle because her brother broke his leg whi...

Q: Susan owns a car that she uses exclusively for personal purposes.

Susan owns a car that she uses exclusively for personal purposes. Its original cost was $26,000, and the fair market value is $12,000. She exchanges the car and $18,000 cash for a new car. a. Calculat...

Q: Reba, a calendar year taxpayer, owns an office building that

Reba, a calendar year taxpayer, owns an office building that she uses in her business. The building is involuntarily converted on November 15, 2017. On January 5, 2018, Reba receives enough proceeds t...

Q: Ida Ross has decided to purchase a new home in a retirement

Ida Ross has decided to purchase a new home in a retirement community for $400,000. She has $50,000 in cash for the down payment but needs to borrow the remaining $350,000 to finance the purchase. Her...

Q: Miller owns a personal residence with a fair market value of $

Miller owns a personal residence with a fair market value of $195,000 and an outstanding first mortgage of $157,500. Miller gets a second mortgage on the residence and in return borrows $10,000 to pur...

Q: Edith’s warehouse (adjusted basis of $450,000) is

Edith’s warehouse (adjusted basis of $450,000) is destroyed by a hurricane in October 2017. Edith, a calendar year taxpayer, receives insurance proceeds of $525,000 in January 2018. Calculate Edith’s...