Exam 8: Property Dispositions

Identify the type(s) of gain or loss that would be recognized on the following asset sales as capital, Section 1231, ordinary, Section 1245 recapture, Section 291 recapture, or Section 1250 unrecaptured gain. -Gain on sale of a building used by a sole proprietorship for eight years in excess of its original cost.

Martone Corporation sells two machines and a warehouse it has been using for storage in the current tax year. Each of the machines cost $25,000 and has an adjusted basis of $11,000 when each was sold for $14,000. The warehouse cost $105,000, has an adjusted basis of $60,000 and is sold for $95,000. All assets were depreciated using MACRS depreciation. What is the amount and type of gain recognized by Martone on the sale of these assets?

Identify the type(s) of gain or loss that would be recognized on the following asset sales as capital, Section 1231, ordinary, Section 1245 recapture, Section 291 recapture, or Section 1250 unrecaptured gain. -Wesley sold a piece of property for $30,000 cash paying a $3,000 sales commission. The buyer assumed Wesley's $13,000 mortgage on the property. Wesley had purchased the property for $15,000 and had invested an additional $6,000 in it. What is Wesley's realized gain on the sale?

Individuals can only deduct capital losses to the extent of capital gains plus $3,000.

Edna had $20,000 of ordinary income. In addition, she had a $1,500 short-term capital gain on one stock and a $4,900 long-term capital loss on another. What is her adjusted gross income?

A gain must be recognized unless some tax provision allows nonrecognition or deferral.

A taxpayer has the following gains and losses from property transactions completed in 2018. What is the effect on the taxpayer's taxable income and income tax if the taxpayer is (a) an individual or (b) a corporation? Long-term capital gain $21,000 Section 1231 gain 10,000 Section 1231 loss 12,000 Short-term capital gain 3,000 Short-term capital loss 18,000

Lopez Corporation sold equipment that it had purchased for $300,000 ($100,000 cash and a note for $200,000) four years ago. As of the date of sale, Lopez had claimed $187,500 in accumulated depreciation on this equipment and had made $50,000 in principal payments on the note. Lopez received $80,000 cash and a note for $100,000 in addition to the purchaser assuming Lopez's $150,000 note on the equipment. What percentage of Lopez Corporation's realized gain on the sale will be taxed as ordinary income due to depreciation recapture?

Sophia, a single taxpayer, is one of the founding shareholders of Davis Corporation. She acquired her Davis Corporation Section 1244 stock four years ago for $163,000. During the current year, Sophia sold all of her Davis stock to an unrelated party for $40,000. There were no other capital gains or losses reported on her tax return for the year. What is the maximum amount of loss that can be deducted on Sophia's current year tax return for the Davis stock?

A taxpayer who disposed of his or her home in 2017 in a short sale had to recognize up to $1 million in cancellation of indebtedness income.

During the current year, Zach had taxable income of $100,000 before considering the following property transactions: Two years ago Zach had a $4,000 gain from the sale of a Section 1231 asset but last year Zach had no capital or Section 1231 gains or losses. What effect will the above property transactions have on Zach current taxable income and will there be any carryforward or carryback of gains or losses?

The holding period for a long-term capital asset must exceed one year for tax-favored treatment.

In 2018, capital gains of individuals can be taxed at 0%, 10%, 15%, 20%, 25%, or 28%, excluding surtaxes.

Abbey has the following gains and losses from property transactions. What is the effect on taxable income if Abbey is (a) a corporation; (b) an individual? Long-term capital gain $2,000 Long-term capital loss 12,000 Section 1231 gain 20,000 Section 1231 loss 15,000 Short-term capital gain 3,000 Short-term capital loss 2,000

Craig and Sally, a married couple, file a joint tax return and report taxable income (excluding their home sale) of $325,000 for 2018. They purchased their home on December 1, 2016 for $250,000 and have made $100,000 of improvements during the time they owned the home. They sold the home on May 31, 2018 after Craig accepted a job in another state netting $775,000 after the expenses of the sale. What are the tax consequences of this sale?

In what order are capital gains subject to the 15%/20%, 25%, and 28% capital gains tax rates included in taxable income in the determination of the tax liability?

Clem and Chloe, a married couple, sell their principal residence that they have owned and occupied for the past twenty years. The adjusted basis for the residence is $324,000. They incurred selling expenses of $30,000. How much gain must they recognize if they sell the residence for $904,000?

What are the carryover provisions for unused capital losses applicable to corporations?

Bennett, who is single, owns all of the outstanding stock of Bennett Company. In 2018 Bennett sells all of his stock in the company for $30,000. If the stock qualifies as Section 1244 and his basis in the stock is $140,000, how is his loss on the sale classified for tax purposes?

A mixed-use asset is an asset that is used for both personal purposes and business activities.