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After a 20 year hiatus, Doug has returned to real estate investing by acquiring an office building in New York City. In setting up his depreciation schedule, his recollection is that he will use 19 year accelerated depreciation. You should correct Doug’s recollection by pointing out that, because of OBRA ’93, the recovery period for commercial property is now:
A new associate, Jane, is working with you in setting up the depreciation schedule for a property acquired by a client in a §1031 exchange. Which of the following citations would give Jane detailed guidance on the depreciation of carryover basis in exchange acquired property?
Craig is an aggressive real estate investor and developer who wants to claim all available depreciation. He has prepared the list below for your review. Using Reg. §1.167, which of the listed items would most likely be excluded from depreciation treatment?
Kent has several clients to whom §1245 and §1250 recapture depreciation rules apply. To which of the following items owned by his clients would the §1250 recapture rules apply?
Carla engaged in an exchange where potential §1250 recapture was not recognized and §1031(d) determined the basis of the §1250 property she acquired. The primary result of this §1031(d) determination is that:
Megan has learned that, for some types of property, the holding period of the disposed property can be added to the holding period of the newly acquired property under §1031. However, you should warn Megan that she is not allowed to do this on:
Emma calls her friend, Steve, who is a tax advisor, and asks if a capital loss occurs in a §1031 exchange would there be any special limitation on the capital loss as used against ordinary income. Steve should reply that:
Amanda carried out a §1031 exchange with her brother Mark. However, §1031 nonrecognition treatment was lost because:
Ben consults his tax advisor about a potential exchange with his sister in which he will receive taxable boot. Since §1031 interacts with a number of other Code sections, Ben asks if there are any other Code provisions that would apply to this transaction. His tax advisor should reply that:
Paul, Matt, and James want to split up their real estate partnership, dissolve the entity, and distribute undivided property interests to each of them which could be later sold or exchanged. You should inform the partners that this has been done before and is sometimes referred to as a reverse:
Silvia engaged in a §1031 property exchange during the most recent tax year. In addition to Schedule D (Form 1040), which provides reporting guidelines for exchanges, Silvia must file:
To quickly analyze available §1031 treatment of a potential exchange, your office has adopted a simplified rule of thumb, known as the “napkin” test. Under this test, you compare proposed properties to see if you are trading even or up in:
By meeting the “napkin” test in searching for potential exchange properties, Leonard opens the possibility of having a fully tax-deferred exchange for himself. However, his tax advisor should point out that an impact on the other party to the exchange would be that:
Randy is interested in a §1031 exchange, has several properties in mind, and wants a quick analysis from his tax advisor. His advisor explains that, to do this analysis, it would be helpful that Randy provide him with three basic figures, namely, fair market value, equity, and:
You are explaining to Mark that economic parity can be tested in a two-party exchange using a simple balancing test similar to comparing two weights on a scale. However, Mark’s exchange involves three parties and a more appropriate test is sometimes referred to as the:
Rita is considering a like-kind exchange and had her tax advisor perform a preliminary exchange analysis which revealed potential taxable net boot. Her advisor should suggest that the parties explore restructuring the exchange to eliminate this taxable boot by locating:
Marian is looking for qualified §1031 exchange property and asks her realtor to help her locate some prospects that could result in a completely tax-free transaction. Marian’s realtor would want to find:
In a college accounting class, you are explaining the various types of §1031 exchanges. Using the text as a guide, you believe it might be helpful to separate all of them into distinct types of “true” exchanges. If you adopt this approach, how many true exchange types exist?
Rick is a retired realtor, has returned to school and, now is in your accounting class. He asks why a taxpayer would not just use the reciprocal sale format which he used years ago. You should point out that this format puts the §1031 exchange at risk if:
On the chalkboard you have diagrammed, for your accounting class, a common exchange type referred to as a three-property-plus exchange. Based on its shape, the procedural format used is often referred to as:
George is setting up a multistep §1031 transaction called a three-party Alderson exchange. Which of the following items would be his initial step indicating an intent to affect a like kind exchange?
Over the weekend, Ferdinand has found to be “perfect” exchange property and will have to sign a purchase agreement to “nail it down” even though he ultimately intends a §1031 exchange. In this situation, what might be helpful if attached to the purchase agreement?
Your client, Harold, would like to engage in an exchange that involves contracting to have research facilities built on an exchanged property and seeks your advice as to its legal status. The court case to reference as the basis for such an exchange using an Alderson variation would be:
Your new associate, Edward, would like to know the distinction between the Baird Publishing and Alderson exchange formats since they accomplish the same end result. You should explain that the critical difference between the formats is that in a Baird Publishing exchange, the accommodator is the:
Fred is an aggressive realtor who has recommended in a complicated transaction that your client agree to a Baird Publishing exchange variation granting a purchase option to the buyer. What can your client do to reduce the risk associated with this variation?
You are helping your client, Earl, with a four party exchange. You explain to him that it would be helpful to divide four-party exchanges into two classifications. In one of these classifications, each party acts as a(n):
Ted’s father is an old-time realtor who keeps insisting that his son do a “Starker” exchange of his commercial property. You explain to Ted that his dad is referring to an early but important exchange case. What type of transaction was primarily involved in the case?
Frank has found a purchaser for his property office building but is unable to immediately locate like kind property to acquire in exchange. A delayed exchange would help Frank since:
Zack and Alex have agreed to a delayed exchange. In consulting with their respective tax advisors, they learned that, while specifically providing for delayed exchanges, the Tax Reform Act of 1984 applies time limits on:
In carrying out their delayed exchange, what must Zack and Alex make sure they accomplish within 180 days as established by the Tax Reform Act of 1984?
Zack and Alex are pleased to find that not only did the Tax Reform Act of 1984 settle many open delayed exchange issues but, the IRS followed in 1991 with expansive regulations. In light of these 1991 regulations, what would you advise Zack and Alex as qualifying for a §1031 delayed exchange?
Greg wants to use a qualified intermediary in a delayed exchange with his client, Alison. Under the §1031 regulations, who would qualify as an intermediary?
Cynthia entered into a delayed exchanged and received interest payments in cash. While the receipt of these payments did not jeopardize §1031 treatment, Cynthia would need to treat the interest payments as:
You are presenting a seminar on exchanges and explaining how regulations now affect qualified escrow accounts and qualified trusts created in association with deferred exchanges. A participant asks who, according to these regulations, is presumed to own the assets in such accounts and trusts. You explain that would be the:
Don has located property that he would like to acquire in an exchange but is yet to find anyone interested in the property that he owns. An investor friend has recommended “warehousing” to acquire property. You should explain to Don that warehousing refers to a form of:
Alan went to a creative real estate seminar sponsored by a §1031 intermediary company and is now interested in the “pot” method as a way to trade properties. His tax advisor should explain that the pot method is an exchange format that uniquely uses a(n):
Joan is trying to set up a three party §1031 exchange and has been told that it is cheaper to use an accommodator rather than a qualified intermediary. She is now confused and seeks your advice. Which of the following best defines an accommodator?
Quentin is a party to a §1031 exchange and would like to use what he calls a “strawman” to accomplish the transaction. His tax advisor recommends he avoid the use of this old exchange term in his documentation. Instead the advisor suggests Quentin refer to such a party merely as a(n):
One of your clients, Brad, is considering a sale and lease-back of the same property to create a property loss. You would want to point out to him, before he goes ahead, a major issue with such plans is that: