Answers At The End Of Each Chapter All Chapters Reverse
Chapter 9
Part 2
Student name:__________
1) Tax neutrality for asset exchanges is the exception rather than the rule.
⊚ true
⊚ false
2) When unrelated parties agree to an exchange of noncash properties, the economic
presumption is that the properties are of equal value.
⊚ true
⊚ false
3) When unrelated parties agree to an exchange of noncash properties, the economic
presumption is that the properties have the same adjusted book basis.
⊚ true
⊚ false
4) Gain realized on a property exchange that is not recognized is deferred.
⊚ true
⊚ false
5) Qualifying property received in a nontaxable exchange has a cost basis for tax purposes.
⊚ true
⊚ false
6) The substituted basis rule results in permanent nonrecognition of gains and losses realized in
a nontaxable exchange.
⊚ true
⊚ false
7) A taxpayer who receives or pays boot in a nontaxable exchange must recognize gain to the
extent of the FMV of the boot.
⊚ true
⊚ false
Version 1 1
,Chapter 9
8) A taxpayer who receives boot in a nontaxable exchange must recognize gain equal to the
lesser of the FMV of the boot or the gain realized.
⊚ true
⊚ false
9) A taxpayer who pays boot in a nontaxable exchange includes the value of the boot in the
basis of the qualifying property received.
⊚ true
⊚ false
10) Nontaxable exchanges typically cause a temporary difference between book income and
taxable income.
⊚ true
⊚ false
11) 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 favorable permanent book/tax difference.
⊚ true
⊚ false
12) Tarletto Incorporated's current year income statement includes a $229,000 gain realized on
the exchange of an old business asset for a new business asset. If the exchange is nontaxable,
Tarletto's book basis in the new asset is $229,000 greater than its tax basis.
⊚ true
⊚ false
13) Mr. Lexon owns investment property with a $719,000 basis. If the property is worth only
$500,000, Mr. Lexon would prefer a taxable disposition of the property over a like-kind
exchange.
⊚ true
⊚ false
Version 1 2
,Chapter 9
14) Muro Incorporated exchanged an old inventory item for a new asset. If the new asset is also
an inventory item, the exchange is nontaxable.
⊚ true
⊚ false
15) Mrs. Cooley exchanged 400 shares of stock for corporate bonds. If the stock and bonds were
issued by the same corporation, they are like-kind properties, and the exchange is nontaxable.
⊚ true
⊚ false
16) Tibco Incorporated exchanged an equity interest in ABM Partnership for an equity interest in
Jolla Partnership. This exchange is taxable.
⊚ true
⊚ false
17) A taxpayer who realizes a loss on the exchange of like-kind property can elect to recognize
the loss.
⊚ true
⊚ false
18) Yelano Incorporated exchanged an old forklift used in its business for a new forklift. This
exchange qualifies as a nontaxable like-kind exchange.
⊚ true
⊚ false
19) Reiter Incorporated exchanged an old forklift for new office furniture. This exchange
qualifies as a nontaxable like-kind exchange.
⊚ true
⊚ false
20) All types of business and investment real properties are like-kind.
⊚ true
⊚ false
Version 1 3
, Chapter 9
21) The goodwill of one business is never of a like-kind to the goodwill of a different business.
⊚ true
⊚ false
22) Mrs. Volter exchanged residential real estate for a commercial office building. The
residential real estate was subject to a $92,800 mortgage, which was assumed by the other
party to the exchange. Mrs. Volter must treat the relief of the mortgage as $92,800 boot
received.
⊚ true
⊚ false
23) Mr. Bentley exchanged investment land subject to a $300,000 mortgage for commercial real
estate subject to a $188,000 mortgage. Mr. Bentley is treated as paying $112,000 boot in the
exchange.
⊚ true
⊚ false
24) Toffel Incorporated exchanged investment land subject to a $240,000 mortgage for
unencumbered farmland. If Toffel realized a $168,000 gain on the exchange, it must
recognize the entire gain.
⊚ true
⊚ false
25) V&P Company exchanged unencumbered investment land for farmland subject to a
$200,000 mortgage. If V&P realized a $168,000 gain on the exchange, it must recognize the
entire gain.
⊚ true
⊚ false
26) 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.
⊚ true
⊚ false
Version 1 4
Chapter 9
Part 2
Student name:__________
1) Tax neutrality for asset exchanges is the exception rather than the rule.
⊚ true
⊚ false
2) When unrelated parties agree to an exchange of noncash properties, the economic
presumption is that the properties are of equal value.
⊚ true
⊚ false
3) When unrelated parties agree to an exchange of noncash properties, the economic
presumption is that the properties have the same adjusted book basis.
⊚ true
⊚ false
4) Gain realized on a property exchange that is not recognized is deferred.
⊚ true
⊚ false
5) Qualifying property received in a nontaxable exchange has a cost basis for tax purposes.
⊚ true
⊚ false
6) The substituted basis rule results in permanent nonrecognition of gains and losses realized in
a nontaxable exchange.
⊚ true
⊚ false
7) A taxpayer who receives or pays boot in a nontaxable exchange must recognize gain to the
extent of the FMV of the boot.
⊚ true
⊚ false
Version 1 1
,Chapter 9
8) A taxpayer who receives boot in a nontaxable exchange must recognize gain equal to the
lesser of the FMV of the boot or the gain realized.
⊚ true
⊚ false
9) A taxpayer who pays boot in a nontaxable exchange includes the value of the boot in the
basis of the qualifying property received.
⊚ true
⊚ false
10) Nontaxable exchanges typically cause a temporary difference between book income and
taxable income.
⊚ true
⊚ false
11) 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 favorable permanent book/tax difference.
⊚ true
⊚ false
12) Tarletto Incorporated's current year income statement includes a $229,000 gain realized on
the exchange of an old business asset for a new business asset. If the exchange is nontaxable,
Tarletto's book basis in the new asset is $229,000 greater than its tax basis.
⊚ true
⊚ false
13) Mr. Lexon owns investment property with a $719,000 basis. If the property is worth only
$500,000, Mr. Lexon would prefer a taxable disposition of the property over a like-kind
exchange.
⊚ true
⊚ false
Version 1 2
,Chapter 9
14) Muro Incorporated exchanged an old inventory item for a new asset. If the new asset is also
an inventory item, the exchange is nontaxable.
⊚ true
⊚ false
15) Mrs. Cooley exchanged 400 shares of stock for corporate bonds. If the stock and bonds were
issued by the same corporation, they are like-kind properties, and the exchange is nontaxable.
⊚ true
⊚ false
16) Tibco Incorporated exchanged an equity interest in ABM Partnership for an equity interest in
Jolla Partnership. This exchange is taxable.
⊚ true
⊚ false
17) A taxpayer who realizes a loss on the exchange of like-kind property can elect to recognize
the loss.
⊚ true
⊚ false
18) Yelano Incorporated exchanged an old forklift used in its business for a new forklift. This
exchange qualifies as a nontaxable like-kind exchange.
⊚ true
⊚ false
19) Reiter Incorporated exchanged an old forklift for new office furniture. This exchange
qualifies as a nontaxable like-kind exchange.
⊚ true
⊚ false
20) All types of business and investment real properties are like-kind.
⊚ true
⊚ false
Version 1 3
, Chapter 9
21) The goodwill of one business is never of a like-kind to the goodwill of a different business.
⊚ true
⊚ false
22) Mrs. Volter exchanged residential real estate for a commercial office building. The
residential real estate was subject to a $92,800 mortgage, which was assumed by the other
party to the exchange. Mrs. Volter must treat the relief of the mortgage as $92,800 boot
received.
⊚ true
⊚ false
23) Mr. Bentley exchanged investment land subject to a $300,000 mortgage for commercial real
estate subject to a $188,000 mortgage. Mr. Bentley is treated as paying $112,000 boot in the
exchange.
⊚ true
⊚ false
24) Toffel Incorporated exchanged investment land subject to a $240,000 mortgage for
unencumbered farmland. If Toffel realized a $168,000 gain on the exchange, it must
recognize the entire gain.
⊚ true
⊚ false
25) V&P Company exchanged unencumbered investment land for farmland subject to a
$200,000 mortgage. If V&P realized a $168,000 gain on the exchange, it must recognize the
entire gain.
⊚ true
⊚ false
26) 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.
⊚ true
⊚ false
Version 1 4
