Question 1

Unrecaptured §1250 gains apply only to individuals.

Accepted Answer

A) True 
 B)False

Question 2

The §1231 look-back rule applies whether there is a net gain or loss.

Accepted Answer

A) True 
 B)False

Question 3

In the current year, Raven sold machinery with a fair market value of $200,000.The machinery's original basis was $190,000 and Raven's accumulated depreciation on the machinery was $40,000, so its adjusted basis to Raven was $150,000.Raven received $50,000 in the current year and a note paying Raven $75,000 a year for two years beginning next year.What is the amount and character of the gain that Raven will recognize in the current year?

Accepted Answer

$42,500 gain recognized: $40,000 ordinar

Question 4

Andrew, an individual, began business four years ago and has never sold a §1231 asset.Andrew owned each of the assets for several years.In the current year, Andrew sold the following business assets:
 $$\begin{array} { l r r r r } 
&&{ \text { Accurnulated } }\
\text { Asset } & \text { Original Cost } &\text { Depreciation } & \text { Gair/Loss } \
\text { Machinery } & \$ 12,000 & \$ 7,000 & \$ 6,000 \
\text { Furniture } & 10,000 &2,00 0 & 3,000 \
\text { Building } & 90,000 & 20,000 & ( 5,000 )
\end{array}$$ Assuming Andrew's marginal ordinary income tax rate is 32 percent, what is the character of the gains and losses and what affect do they have on Andrew's tax liability?

Accepted Answer

$4,000 ordinary income and $1,280 of tax

Question 5

Which of the following does not ultimately result in a capital gain or loss?

Accepted Answer

A) Sale of a personal use asset. 
B) Sale of inventory. 
C) Gain on equipment used in a trade or business and held for more than one year, if it is the only asset sale during the year. 
D) Sale of capital stock in another company. 
E) None of the choices are correct. 
A) Sale of a personal use asset. 
B) Sale of inventory. 
C) Gain on equipment used in a trade or business and held for more than one year, if it is the only asset sale during the year. 
D) Sale of capital stock in another company. 
E) None of the choices are correct.

Question 6

Sadie sold 10 shares of stock to her brother, George, for $500 16 months ago.Sadie had purchased the stock for $600 two years earlier.If George sells the stock for $700, what are the amount and character of his recognized gain or loss in the current year?

Accepted Answer

A) $0. 
B) $100 short-term capital gain. 
C) $100 long-term capital gain. 
D) $200 short-term capital gain. 
E) None of the choices are correct. 
A) $0. 
B) $100 short-term capital gain. 
C) $100 long-term capital gain. 
D) $200 short-term capital gain. 
E) None of the choices are correct.

Question 7

Each of the following is true except for:

Accepted Answer

A) a direct involuntary conversion occurs when property taken under eminent domain is replaced with other property. 
B) qualified replacement property rules are more restrictive than the like-kind property rules. 
C) an indirect involuntary conversion occurs when property is destroyed and insurance proceeds are used to purchase qualified replacement property. 
D) losses realized in involuntary conversions are deferred. 
E) all of the choices are true. 
A) a direct involuntary conversion occurs when property taken under eminent domain is replaced with other property. 
B) qualified replacement property rules are more restrictive than the like-kind property rules. 
C) an indirect involuntary conversion occurs when property is destroyed and insurance proceeds are used to purchase qualified replacement property. 
D) losses realized in involuntary conversions are deferred. 
E) all of the choices are true.

Question 8

Which one of the following is not true regarding a like-kind exchange?

Accepted Answer

A) Loss on like-kind property is not recognized. 
B) Gains on boot given are deferred. 
C) Losses on boot given are not recognized. 
D) Land can be like-kind with a building. 
E) All of the choices are true. 
A) Loss on like-kind property is not recognized. 
B) Gains on boot given are deferred. 
C) Losses on boot given are not recognized. 
D) Land can be like-kind with a building. 
E) All of the choices are true.

Question 9

All tax gains and losses are ultimately characterized as either ordinary or capital.

Accepted Answer

A) True 
 B)False

Question 10

Assets held for investment and personal use assets are examples of capital assets.

Accepted Answer

A) True 
 B)False

Question 11

Winchester LLC sold the following business assets during the current year: (1)automobile, $30,000 cost basis, $12,000 depreciation, $20,000 proceeds; (2)machinery, $25,000 cost basis, $20,000 depreciation, $10,000 proceeds; (3)furniture, $15,000 cost basis, $10,000 depreciation, $4,000 proceeds; (4)computer equipment, $25,000 cost basis, $6,000 depreciation, $10,000 proceeds; (5)Winchester had unrecaptured §1231 losses of $3,000 in the prior five years.What are the amount and character of Winchester's gains and losses before the §1231 netting process? Assume all assets were held for more than one year.

Accepted Answer

A) $3,000 ordinary loss, $0 §1231 loss. 
B) $7,000 ordinary gain, $10,000 §1231 loss. 
C) $7,000 ordinary loss, $4,000 §1231 gain. 
D) $1,000 ordinary gain, $4,000 §1231 loss. 
E) None of the choices are correct. 
A) $3,000 ordinary loss, $0 §1231 loss. 
B) $7,000 ordinary gain, $10,000 §1231 loss. 
C) $7,000 ordinary loss, $4,000 §1231 gain. 
D) $1,000 ordinary gain, $4,000 §1231 loss. 
E) None of the choices are correct.

Question 12

Taxpayers can recognize a taxable gain on the sale of an asset even though an asset's real economic value has declined.

Accepted Answer

A) True 
 B)False

Question 13

Arlington LLC exchanged land used in its business for some new land.Arlington originally purchased the land it exchanged for $28,000.The new land had a fair market value of $35,000.Arlington also received $2,000 of office equipment in the transaction.What is Arlington's recognized gain or loss on the exchange?

Accepted Answer

A) $0. 
B) $2,000. 
C) $7,000. 
D) $9,000. 
E) None of the choices are correct. 
A) $0. 
B) $2,000. 
C) $7,000. 
D) $9,000. 
E) None of the choices are correct.

Question 14

Depreciation recapture changes both the amount and character of a gain.

Accepted Answer

A) True 
 B)False

Question 15

Alexandra sold equipment that she uses in her business for $100,000.Alexandra bought the equipment two years ago for $90,000 and has claimed $25,000 of depreciation expense.What is the amount and character of Alexandra's gain or loss?

Accepted Answer

$25,000 ordinary gain, and $10,000 §1231

Question 16

Unrecaptured §1250 gain is taxed at a maximum rate of 25 percent.

Accepted Answer

A) True 
 B)False

Question 17

Ordinary gains and losses are obtained on the sale of investments.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is how gain or loss realized is calculated?

Accepted Answer

A) Cash less selling costs. 
B) Cost basis less cost recovery. 
C) Cash less cost recovery. 
D) Amount realized less adjusted basis. 
E) None of the choices are correct. 
A) Cash less selling costs. 
B) Cost basis less cost recovery. 
C) Cash less cost recovery. 
D) Amount realized less adjusted basis. 
E) None of the choices are correct.

Question 19

The gain or loss realized on the sale of an asset is always recognized for tax purposes.

Accepted Answer

A) True 
 B)False

Question 20

The gain or loss realized on the sale of an asset is the amount realized less the adjusted basis.

Accepted Answer

A) True 
 B)False

Unrecaptured §1250 gains apply only to individuals.

The §1231 look-back rule applies whether there is a net gain or loss.

Which of the following does not ultimately result in a capital gain or loss?

Sadie sold 10 shares of stock to her brother, George, for $500 16 months ago.Sadie had purchased the stock for $600 two years earlier.If George sells the stock for $700, what are the amount and character of his recognized gain or loss in the current year?

Each of the following is true except for:

Which one of the following is not true regarding a like-kind exchange?

All tax gains and losses are ultimately characterized as either ordinary or capital.

Assets held for investment and personal use assets are examples of capital assets.

Taxpayers can recognize a taxable gain on the sale of an asset even though an asset's real economic value has declined.

Depreciation recapture changes both the amount and character of a gain.

Alexandra sold equipment that she uses in her business for $100,000.Alexandra bought the equipment two years ago for $90,000 and has claimed $25,000 of depreciation expense.What is the amount and character of Alexandra's gain or loss?

Unrecaptured §1250 gain is taxed at a maximum rate of 25 percent.

Ordinary gains and losses are obtained on the sale of investments.

Which of the following is how gain or loss realized is calculated?

The gain or loss realized on the sale of an asset is always recognized for tax purposes.

The gain or loss realized on the sale of an asset is the amount realized less the adjusted basis.

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Dependents, and Filing Status

Gross Income and Exclusions

Individual for Agi Deductions

Individual From Agi Deductions

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Entities Overview

Corporate Formations and Operations

Corporate Nonliquidating and Liquidating Distributions

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

Filters

Exam 11: Property Dispositions

Unrecaptured §1250 gains apply only to individuals.

The §1231 look-back rule applies whether there is a net gain or loss.

Which of the following does not ultimately result in a capital gain or loss?

Sadie sold 10 shares of stock to her brother, George, for $500 16 months ago.Sadie had purchased the stock for $600 two years earlier.If George sells the stock for $700, what are the amount and character of his recognized gain or loss in the current year?

Each of the following is true except for:

Which one of the following is not true regarding a like-kind exchange?

All tax gains and losses are ultimately characterized as either ordinary or capital.

Assets held for investment and personal use assets are examples of capital assets.

Taxpayers can recognize a taxable gain on the sale of an asset even though an asset's real economic value has declined.

Depreciation recapture changes both the amount and character of a gain.

Alexandra sold equipment that she uses in her business for $100,000.Alexandra bought the equipment two years ago for $90,000 and has claimed $25,000 of depreciation expense.What is the amount and character of Alexandra's gain or loss?

Unrecaptured §1250 gain is taxed at a maximum rate of 25 percent.

Ordinary gains and losses are obtained on the sale of investments.

Which of the following is how gain or loss realized is calculated?

The gain or loss realized on the sale of an asset is always recognized for tax purposes.

The gain or loss realized on the sale of an asset is the amount realized less the adjusted basis.

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Dependents, and Filing Status

Gross Income and Exclusions

Individual for Agi Deductions

Individual From Agi Deductions

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Entities Overview

Corporate Formations and Operations

Corporate Nonliquidating and Liquidating Distributions

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

Filters