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ACC330 Exam 3 Questions And Answers
|Latest 2025 | Guaranteed Pass.
Nontaxable exchange - Answer✔a transaction resulting in gain or loss thats not recognized (in
whole or part) in the current year
- BTD is temporaty and will reverse as newly acquired property is depreciated or disposed of
- if no cash is received, entire gain or loss is deferred
how do nontaxable exchanges make tax law neutral? - Answer✔can convert property from one
form to another without tax costs
elements of a generic nontaxable exchange - Answer✔- transforms one property interest into
another
- only disposition and receipt of qualifying property can be a nontaxable exchange
- must be nontaxable to both firms (agreed before exchange that properties are of equal value
for arm's length exchange)
substituted basis rule - Answer✔causes an unrecognized gain or loss on a nontaxable exchange
to be included in the basis of the qualifying property acquired, G/L remains dormant as long as
taxpayer holds the property and is recognized upon taxable disposition of the property
- FMV of property received - deferred gain or + deferred loss
how to calculate basis of property surrendered in a nontaxable exchange - Answer✔same as
basis of property acquired,
FMV of property - deferred gain/+ deferred loss
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boot - Answer✔any cash or nonqualifying property included in a nontaxable exchange when
the FMV of properties are unequal
- party receiving boot recognizes a portion of realized gain equal to boot FMV
- must allocate basis between boot and property
how to calculate basis of qualifying property acquired when there's a boot received -
Answer✔basis of qualifying property surrendered + gain recognized - FMV of boot
how to calculate basis of qualifying property acquired when there's a boot paid - Answer✔basis
of qualifying property surrendered + FMV of boot
characteristics of nontaxable exchange - Answer✔- involves qualifying property
- G/L realized on exchange is deferred
- basis of qualifying property received = basis of qualifying property surrendered (substituted
basis rule)
- receipt of booth trigger gain recognition up to boot FMV
corporate formation - Answer✔no G/L is recognized when property(tangible and intangible
assets, NOT personal services) is transferred to a corp solely in exchange for stock if receive
control of property immediately after exchange
- 351 corp formation rule: transferor must own at least 80% of stock after exchange to be
nontaxable
- corp does not recognize G/L whether nontaxable or taxable to transferor
- if exchange is nontaxable(80%), corp takes carryover basis from transferor for property
- if exchange is taxable, corp takes cost basis for property
partnership formation - Answer✔neither partners or partnership recognize G/L when property
is exchanged for equity interest
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ACC330 Exam 3 Questions And Answers
|Latest 2025 | Guaranteed Pass.
Nontaxable exchange - Answer✔a transaction resulting in gain or loss thats not recognized (in
whole or part) in the current year
- BTD is temporaty and will reverse as newly acquired property is depreciated or disposed of
- if no cash is received, entire gain or loss is deferred
how do nontaxable exchanges make tax law neutral? - Answer✔can convert property from one
form to another without tax costs
elements of a generic nontaxable exchange - Answer✔- transforms one property interest into
another
- only disposition and receipt of qualifying property can be a nontaxable exchange
- must be nontaxable to both firms (agreed before exchange that properties are of equal value
for arm's length exchange)
substituted basis rule - Answer✔causes an unrecognized gain or loss on a nontaxable exchange
to be included in the basis of the qualifying property acquired, G/L remains dormant as long as
taxpayer holds the property and is recognized upon taxable disposition of the property
- FMV of property received - deferred gain or + deferred loss
how to calculate basis of property surrendered in a nontaxable exchange - Answer✔same as
basis of property acquired,
FMV of property - deferred gain/+ deferred loss
1|P a g e
, ©BRIGHTSTARS 2025 ALL RIGHTS RESERVED 1:26 PM A+
boot - Answer✔any cash or nonqualifying property included in a nontaxable exchange when
the FMV of properties are unequal
- party receiving boot recognizes a portion of realized gain equal to boot FMV
- must allocate basis between boot and property
how to calculate basis of qualifying property acquired when there's a boot received -
Answer✔basis of qualifying property surrendered + gain recognized - FMV of boot
how to calculate basis of qualifying property acquired when there's a boot paid - Answer✔basis
of qualifying property surrendered + FMV of boot
characteristics of nontaxable exchange - Answer✔- involves qualifying property
- G/L realized on exchange is deferred
- basis of qualifying property received = basis of qualifying property surrendered (substituted
basis rule)
- receipt of booth trigger gain recognition up to boot FMV
corporate formation - Answer✔no G/L is recognized when property(tangible and intangible
assets, NOT personal services) is transferred to a corp solely in exchange for stock if receive
control of property immediately after exchange
- 351 corp formation rule: transferor must own at least 80% of stock after exchange to be
nontaxable
- corp does not recognize G/L whether nontaxable or taxable to transferor
- if exchange is nontaxable(80%), corp takes carryover basis from transferor for property
- if exchange is taxable, corp takes cost basis for property
partnership formation - Answer✔neither partners or partnership recognize G/L when property
is exchanged for equity interest
2|P a g e
