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AC 507 Unit 5 Quiz (Kaplan University)


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AC 507 Unit 5 Quiz (Kaplan University)

  1. Willow Corporation exchanged land valued at $250,000 (adjusted basis = $175,000) for a building owned by Tree Corporation valued at $350,000 (adjusted basis = $200,000) and $50,000 cash. In addition, Willow assumed the $150,000 mortgage on Tree’s building. What are Willow and Tree’s realized gains or losses on the properties exchanged, respectively?
  2. Zandu Corporation exchanged a building (fair market value = $1,000,000, adjusted basis = $700,000) and two semi-tractor-trailers (fair market value = $300,000; adjusted basis = $225,000), all five years old, for land to build a new facility valued at $1,300,000. What is Zandu’s realized and recognized gain and its basis in the land? 
  3. Trudi Corporation has a building that it needs to sell or exchange because of growth in its business. If Trudi sells the building, it will have a gain of $450,000. What is the amount of taxes that Trudi will avoid paying if it can exchange the building? The corporation has $1,000,000 of taxable income from operations for the current year.
  4. As part of a divorce decree, Janet must give her ex-spouse Herman her half-interest in stock with a total value of $120,000 (total basis = $70,000) in exchange for his half-interest in their home with a total value of $150,000 and a basis of $130,000. What are Janet and Herman’s realized and recognized gains or losses on this exchange?
  5. Wally’s investment real estate was condemned on November 14, 2014. On February 14, 2015, he received $250,000 for the property that had a basis of $210,000. What is the last date that Wally can acquire replacement property to avoid gain recognition?
  6. Which of the following is not a characteristic of involuntary conversions?
  7. Bertam transfers property with a $50,000 mortgage, a fair market value of $350,000, and a basis of $200,000 for stock valued at $300,000. If the corporation assumes the mortgage, what is Bertram’s basis in the stock received in this qualifying Section 351 transaction?
  8. Sophie received a 30 percent interest in a general partnership in exchange for property valued at $35,000 (adjusted basis = $25,000) and services valued at $5,000. In addition, the partnership assumed the $10,000 liability on the property. What is Sophie’s basis in her partnership interest?
  9. Which of the following is not a characteristic of a corporation?
  10. The maximum marginal corporate tax rate excluding surtaxes is:
  11. A transfers machines valued at $170,000 (basis = $150,000) along with $30,000 cash to AB Corporation and B transfers real property valued at $320,000 (basis = $310,000) to the corporation. A receives 40 percent of the outstanding stock and B receives 60 percent. B also receives $20,000 from the corporation. What is B’s basis for his AB stock?
  12. A corporation that owns 72 percent of all the outstanding stock of another corporation:
  13. The Willow Corporation reported $400,000 of taxable income. In making a conversion to book income, the accountant had to adjust for the following: a $25,000 Section 179 deduction, but book depreciation would have been $5,000; a fine of $12,500 for overweight trucks; and a net capital loss of $10,000. What is Willow Corporation’s book income?
  14. Elizabeth exchanges her retail storage assets for retail displays. In this like-kind exchange, Elizabeth receives $2,000 in cash. The storage assets have a fair market value of $12,000 and Elizabeth’s basis in the assets is $3,000. The displays have a fair market value of $10,000 and a basis of $8,000. What is Elizabeth’s realized gain on the exchange?

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