Reference no: EM132962803

Problems -

Q1. Brian Bush and Charles Chex exchange business machines. Brian gives Charles a machine with a basis of $3,500 (fair market value $3,000) plus $2,000 in cash. Charles gives Brian a machine with a basis of $4,000 and a fair market value of $5,000. What is Charles's recognized gain?

a. $2,000

b. $500

c. $1,000

d. $0

Q2. David Drummond and Edward Engels exchange business cars. David gives Edward a car with a basis of $17,500 and a fair market value of $21,500. David receives from Edward a car with a basis of $12,500 (fair market value of $17,000) and $4,500 cash. What is David's basis in the new car?

a. $21,500

b. $17,000

c. $12,500

d. $15,000

Q3. Real property where Paul Peterson's warehouse is located is condemned by the public authorities on November 23, 2019. Paul purchased the warehouse in 2011 for $800,000, and the warehouse had and adjusted basis of $420,000 and a fair market value of $1 million. He receives $1 million from the public authorities on March 5, 2020. Paul reinvests $950,000 in qualified replacement property. How much gain is recognized by Paul?

a. $420,000.

b. $50,000.

c. $580,000.

d. $1,000,000.

e. $950,000

Q4. Which of the following is not an example of a nontaxable like-kind exchange?

a. Improved real estate for unimproved real estate.

b. Inventory for common stock.

c. The trade of an apartment building for a store building.

d. Real estate for a ranch.