Exam 8: Property Dispositions

What did Congress do to close the loophole that allowed a person to exclude the gain on a primary personal residence and then later claim the exclusion on a vacation home that was owned at the same time as the primary residence?

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. -Lopez Corporation sold equipment that is 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 is Lopez Corporation's realized gain on the sale?

Ethan, a sole proprietor, sold the following assets in 2018: The equipment was purchased several years ago but the XYZ stock was purchased as an investment on 3/9/18 and was sold on 11/15/18. Ethan is in the 32% marginal tax bracket for 2018. At the beginning of 2018, he had $2,000 of unrecaptured Section 1231 losses from 2 years ago. How much additional tax will Ethan pay as a result of these transactions?

The tax effect of a sale of an asset at a gain increases the cash flow from the sale.

Donza Company has unrecaptured Section 1231 losses from the two previous years totaling $25,000 and a $32,000 Section 1231 gain in the current year. Based on this information, all of the following statements concerning Donza's taxable income for the current year are correct except:

Coley Corporation has an $800 net short-term capital loss and a $6,000 net long-term capital gain in the current year. It also has an $8,000 long-term capital loss carryover from the prior year. What is Coley's capital loss carryover to the next year?

Ian and Mia married in early 2018 and purchased a new home together. Each owned and lived in separate residences prior to the marriage. Ian purchased his residence 5 years ago for $190,000 and he added a master bedroom and bathroom addition at a cost of $40,000. Mia purchased her home three years ago for $135,000. In late 2018, Ian sold his residence for $510,000 and paid a sales commission of $8,000. After paying off his $80,000 mortgage balance, he received the remaining cash proceeds of $422,000. In late 2018 Mia sold her residence for $190,000 and paid a sales commission of $2,000. She had paid off her mortgage so she received $188,000 cash from the sale. If Ian and Mia file a joint tax return for 2018, how much gain do they recognize on their 2018 joint tax return from the sales of their previous homes?

Wally (who is in the 24 percent tax bracket) has a $5,000 short-term capital loss on some bonds, a $6,000 long-term capital loss on collectibles, a $15,000 Section 1202 gain, and a net $4,000 long-term capital gain from an investment. What is amount and type of gain(s) and tax rate(s) applied?

On March 17, a calendar-year taxpayer sells a machine used in its business for $9,500. The machine was purchased sixteen months earlier for $9,000 and depreciation deductions of $1,800 have been taken. What is the amount and type of gain recognized on the sale?

Section 1245 recapture is primarily applicable to realty.

Which of the following is not a requirement for the stock of a corporation to be considered Section 1244 stock?

Carol used her auto 60 percent for business and 40 percent for personal use. She purchased it for $10,800 and has taken $3,992 of depreciation on it. What is her recognized gain on a sale for $7,800 and what is it character?

Jason sells a piece of equipment for $43,000. The equipment was purchased four years ago for $56,000. It was depreciated using an accelerated method of depreciation. Its adjusted basis at the time of sale is $21,000. Straight-line depreciation would have been only $20,000. What is the amount and type of gain Jordan recognizes on this sale?

An individual's net Section 1231 gain is given the tax-favored treatment of a long-term capital asset.

Sheldon had salary income of $40,000. In addition, he had the following gains and losses on his property transactions: Long-term capital gain = $14,000; long-term capital loss = $6,000; short-term capital gain = $4,000; short-term capital loss = $8,000. If Sheldon has no other income items, what is his total income before any deductions for the year?

George and Sally sold their primary residence in New Jersey on January 1, 2016 after having lived in the home for 20 years. (They used their $500,000 exclusion to avoid recognizing their $289,000 gain on the sale.) They decided to become permanent Florida residents and moved into the condominium they had purchased on January 2, 2014 at a foreclosure auction. Unfortunately, Sally missed all of her friends and family in New Jersey and in the latter part of 2018, they put the condominium up for sale and they sold it on January 2, 2019. They had purchased the condominium for only $65,000 and after putting in improvements at a cost of $21,000, they were able to sell it for $525,000. What is their realized and recognized gain on the sale of the condominium?

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 the sale of inventory.

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

Justin, who is single, sells his principal residence that he has owned and occupied for the past five years. His adjusted basis for the residence is $90,000. He incurred selling expenses of $10,000. How much gain must Justin recognize if sells the residence for $390,000?

All assets owned by a trade or business are Section 1231 assets.