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ACCT 3013 EXAM 2 QUIZ QUESTIONS AND ANSWERS
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ACCT 3013 EXAM 2 QUIZ QUESTIONS AND ANSWERS....
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Qualifying property received in a nontaxable exchange has a cost basisfor tax purposes. - ANSWER false (qualifying property takes a
substituted basis)
A taxpayer who receives or pays boot in a nontaxable exchange must
recognize gain to the extent of the FMV of the boot. - ANSWER false
(payment of boot does not trigger gain recognition)
Signo Incorporated's current year income statement includes a $21,000
gain realized on the exchange of an old business asset for a new
business asset. If the exchange is nontaxable, Signo has a $21,000
favourable permanent book/tax difference. - ANSWER false (the
book/tax difference is temporary)
Reiter Incorporated exchanged an old forklift for new office furniture.
This exchange qualifies as a nontaxable like-kind exchange. - ANSWER
false
In a like-kind exchange in which both properties are subject to a
mortgage, both parties to the exchange are treated as receiving boot
equal to the relief of their respective mortgage. - ANSWER false (only
the amount of net debt relief is treated as boot by the party with the net
debt relief)
LiO Company transferred an old asset with a $13,600 adjusted tax basis
in exchange for a new asset worth $11,000 and $1,500 cash. Which of
the following statements is false?
A. if the exchange is taxable, LiO recognizes a $1,100 loss
B. if the exchange is nontaxable, LiO recognizes no loss
C. if the exchange is nontaxable, LiO's basis in the new asset is $12,100
D. none of these chioces are false - ANSWER None of these
statements are false.
A. (11,000+1,500)-13,600=(1,100)
, C. 11,000+1,100=1,200
Oxono Company realized a $74,900 gain on the exchange of one asset
for another asset (no cash was included in the exchange). The assets
were like-kind properties. Oxono reported the gain as revenue on its
financial statements. Which of the following is true?
(fave/unfave temp/perm) - ANSWER The exchange resulted in a
favorable temporary book/tax difference.
Mr. Weller and the Olson Partnership entered into an exchange of
investment real property. Mr. Weller's property was subject to a
$428,000 mortgage, which Olson assumed. Olson's property was
subject to a $235,000 mortgage, which Mr. Weller assumed. Which of
the following statements is true? (who paid and received what amounts
of boot?) - ANSWER Mr. Weller received $193,000 boot; Olson paid
$193,000 boot.
(428,000-235,000)=193,000
Gem Company's manufacturing facility was destroyed by a flood. The
facility's adjusted basis was $665,000, and Gem received an $850,000
insurance reimbursement. Within 18 months of the flood, Gem rebuilt the
facility at a total cost of $975,000. Which is Gem's basis in the new
facility? - ANSWER $790,000
975,000-(850,000-665,000)
Mr. Slake sold 1,580 shares of publicly traded DDL stock (tax basis
$49,240) for $40,000 cash on February 13. He paid $43,000 cash to
purchase 1,600 DDL shares on March 2. Compute Mr. Slake's loss
recognized on the February 13 sale and determine his tax basis in the
1,600 shares. - ANSWER No loss recognized; $52,240 basis
1) On January 21, 2009, Cody purchased 350 shares of Bond Co.
common stock for $25,500. On November 13, 2020, he sold the 350
shares for $7,250. On December 1, 2020, Cody purchased 350 shares
of Bond common stock for $8,000. What is Cody's basis in these
shares? - ANSWER $26,250
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