6/19/2017 WileyCPAexcelREG

Other Nonrecognition Transactions Results 6/19/2017

Question 1
(AICPA.090847REG)

Wynn, a single individual age 60, sold Wynn's personal residence for $450,000. Wynn had owned Wynn's residence, which had a basis of $250,000, for six years. Within eight
months of the sale, Wynn purchased a new residence for $400,000. What is Wynn's recognized gain from the sale of Wynn's personal residence?

$0

$50,000

$75,000

$200,000

You Answered Incorrectly.

This response incorrectly provides that $75,000 of the gain must be recognized. A taxpayer may exclude realized gains up to $250,000 ($500,000 if filing joint) on the sale
of a residence if the residence has been owned and used by the taxpayer as a principal residence for at least two of the preceding five years. Wynn's realized gain is
$200,000 ($450,000 amount realized $250,000 adjusted basis), so all of this gain can be excluded.

Question 2
(AICPA.120746REG)

A married couple purchased their principal residence for $300,000. They spent $40,000 on improvements. After living in it for 10 years, the couple sold the home for $650,000
and paid $36,000 in real estate commissions. What gain should the couple recognize on their joint return?

$0
$ 60,000
$274,000
$310,000

You Answered Incorrectly.

Since this is a married couple that meets the ownership and use test they can exclude up to $500,000 of gain on the sale of a principal residence. Thus, none of the
$274,000 gain is included in income.

Question 3
(AICPA.921108REG-P2-AR)

Ryan, age 57, is single with no dependents. In 2017, Ryan's principal residence was sold for the net amount of $400,000 after all selling expenses.

Ryan bought the house in 2000 and occupied it until it was sold. On the date of sale, the house had a basis of $180,000. Ryan does not intend to buy another residence.
What is the maximum exclusion of gain on sale of the residence that may be claimed on Ryan's 2017 income tax return?

$500,000

$220,000

$125,000

$0

You Answered Correctly!

The realized gain is $220,000 ($400,000 $180,000). Taxpayers may exclude up to $250,000 ($500,000 for married filing jointly if both qualify) from the sale of his/her
principal residence. To qualify for the exclusion, the taxpayer must own and use the residence as his/her principal residence for two of the 5 years preceding the sale of
the residence. Once a taxpayer has made this election, he/she is not eligible to make the election again for two years. The entire $220,000 gain is excluded.

Question 4
(AICPA.090838REG)

Sands purchased 100 shares of Eastern Corp. stock for $18,000 on April 1 of the prior year. On February 1 of the current year, Sands sold 50 shares of Eastern for $7,000. Fifteen
days later, Sands purchased 25 shares of Eastern for $3,750. What is the amount of Sands's recognized gain or loss?

$0

$500 loss

$1,000 loss

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$2,000 loss

You Answered Correctly!

Sand's basis per share is $180 ($18,000/100 shares). Sand's realized loss on the 50 shares sold is $2,000 ($7,000 amount realized $9,000 basis ($180 50 shares). This
loss is not recognized under the wash sale rule if the same stock is repurchased within 30 days. Since only 25 shares were repurchased during the 30 day period, 50% (25
shares/50 shares) of the loss is not recognized. Therefore, $1,000 of the realized loss is recognized.

Question 5
(AICPA.120728REG)

In the current year, Essex sold land with a basis of $80,000 to Yarrow for $100,000. Yarrow paid $25,000 down and agreed to pay $15,000 per year, plus interest, for the next five
years, beginning in the second year. Under the installment method, what gain should Essex include in gross income for the year of sale?

$25,000

$20,000

$15,000

$ 5,000

You Answered Incorrectly.

This response provides the amount of basis that is recovered in the year of sale rather than the amount of gain recognized.

Question 6
(AICPA.921118REG-P2-AR)

Among which of the following related parties are losses from sales and exchanges not recognized for tax purposes?

Father-in-law and son-in-law

Brother-in-law and sister-in-law

Grandfather and granddaughter

Ancestors, lineal descendants, and all in-laws

You Answered Incorrectly.

Losses from sales and exchanges made by related parties are not recognized for tax purposes. A taxpayer's brothers and sister (whole and half blood), spouse, ancestors
and lineal descendants are considered related parties. A taxpayer's in-laws are not considered members of his/her family.
This response falsely states that a taxpayer's in-laws are considered related parties in respect to the taxpayer.

Question 7
(AICPA.950504REG-AR)

Conner purchases 300 shares of Zinco stock for $30,000 in 2002. On May 23, 2016, Conner sells all the stock to his daughter, Alice, for $20,000, its then fair market value. Conner
realizes no other gain or loss during 2016. On July 26, 2017, Alice sells the 300 shares of Zinco for $25,000.
What is Alice's recognized gain or loss on her sale?

$0

$5,000 long-term gain

$5,000 short-term loss

$5,000 long-term loss

You Answered Incorrectly.

A taxpayer acquiring property through purchase or exchange from a person who sustained a loss on the transaction that was disallowed owing to related taxpayer rules
realizes a gain on the sale or other disposition of the property only to the extent that the gain exceeds the amount of the disallowed loss. Alice acquired the Zinco stock
from her father, who sustained a disallowed loss of $10,000 ($20,000 selling price, less $30,000 purchase price). Hence, Alice would have to realize a gain of more than
$10,000 for her to recognize a gain, since she now has a right of offset of $10,000.
Alice purchased the stock from her father for $20,000 and sold the stock for $25,000 - realizing a gain of $5,000. Since Alice's realized gain is less than her father's right of
offset, Alice does not recognize any gain on the sale of the stock.
This response incorrectly implies that Alice would assume her father's basis in the stock and, therefore, recognize a loss, but starts the holding period from the date of
her purchase to make it short-term.

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Question 8
(AICPA.931125REG-P2-AR)

Smith, an individual calendar-year taxpayer, purchased 100 shares of Core Co. common stock for $15,000 on December 15, 2016, and an additional 100 shares for $13,000 on
December 30, 2016. On January 3, 2017, Smith sold the shares purchased on December 15, 2016, for $13,000.
What amount of loss from the sale of Core's stock is deductible on Smith's 2016 and 2017 income tax returns?

2016 2017

$0 $0

$0 $2,000

$1,000 $1,000

$2,000 $0

You Answered Incorrectly.

Under wash-sale rules, taxpayers may not recognize losses attributable to the sale of stock or securities if substantially identical stock or securities are purchased 30
days before or after the sale giving rise to the loss. Wash-sale rules do not prevent the recognition of gains from these sales.
Smith sold 100 shares of Core Co. common stock on January 3, 2016, for $13,000. As the stock was purchased for $15,000, Smith sustained a loss of $2,000 on the
transaction. However, Smith may not recognize this loss because Smith purchased an additional 100 shares for $13,000 on December 30, 2016, which was within 30 days
before or after the January 3, 2017, sale. Thus, Smith may not recognize a loss in either 2016 or 2017.
This response incorrectly indicates that Smith should recognize the one-half of the realized loss in 2016 and the other one-half in 2017.

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