Question 1

Which of the following may qualify as an installment sale?

Accepted Answer

A) Sale of inventory at a gain. 
B) Sale of securities. 
C) Sale of asset used in a business at a gain. 
D) Land sold at a loss. 
E) All of the choices qualify for installment sale treatment. 
A) Sale of inventory at a gain. 
B) Sale of securities. 
C) Sale of asset used in a business at a gain. 
D) Land sold at a loss. 
E) All of the choices qualify for installment sale treatment.

Question 2

Jessie sold a piece of land held for investment for $250,000.Jessie bought the land two years ago for $195,000.What is the amount and character of Jessie's gain?

Accepted Answer

Capital gain of $55,000.
The $

Question 3

Only accelerated depreciation is recaptured for §1245 assets.

Accepted Answer

A) True 
 B)False

Question 4

Which one of the following is not considered boot in a like-kind exchange?

Accepted Answer

A) Cash. 
B) Other property. 
C) Mortgage given. 
D) Mortgage received. 
E) All of the choices can be considered as boot. 
A) Cash. 
B) Other property. 
C) Mortgage given. 
D) Mortgage received. 
E) All of the choices can be considered as boot.

Question 5

How long after the initial exchange does a taxpayer have to identify replacement property in a like-kind exchange?

Accepted Answer

A) The like-kind property to be received must be identified within 45 days. 
B) The like-kind property to be received must be identified by the earlier of 45 days or the last day of the taxpayer's taxable year. 
C) The like-kind property to be received must be identified within 180 days. 
D) There is no deadline for the identification of replacement property. 
E) All of the choices are correct. 
A) The like-kind property to be received must be identified within 45 days. 
B) The like-kind property to be received must be identified by the earlier of 45 days or the last day of the taxpayer's taxable year. 
C) The like-kind property to be received must be identified within 180 days. 
D) There is no deadline for the identification of replacement property. 
E) All of the choices are correct.

Question 6

A net §1231 gain becomes ordinary while a net §1231 loss becomes long-term capital gain.

Accepted Answer

A) True 
 B)False

Question 7

Realized gains are recognized unless there is specific exception.

Accepted Answer

A) True 
 B)False

Question 8

The amount realized is the sale proceeds less the adjusted basis.

Accepted Answer

A) True 
 B)False

Question 9

Alpha sold machinery that it used in its business to Beta, a related entity, for $40,000.Beta used the machinery in its business.Alpha bought the machinery a few years ago for $50,000 and has claimed $30,000 of depreciation expense.What is the amount and character of Alpha's gain?

Accepted Answer

A) $20,000 ordinary income under §1239. 
B) $10,000 ordinary gain and $10,000 §1231 gain. 
C) $20,000 §1231 gain. 
D) $20,000 capital gain. 
E) None of the choices are correct. 
A) $20,000 ordinary income under §1239. 
B) $10,000 ordinary gain and $10,000 §1231 gain. 
C) $20,000 §1231 gain. 
D) $20,000 capital gain. 
E) None of the choices are correct.

Question 10

Suzanne, an individual, began business four years ago and has never sold a §1231 asset.Suzanne owned each of the assets for several years.In the current year, Suzanne sold the following business assets:
 $$\begin{array} { l r r r r } 
& &  { \text { Accurmulated } } &  \
\text { Asset } & \text { Original Cost } & \text { Depreciation } &  { \text { Gair/Loss } }  \
\text { Machirzery } & \$ 12,000 & \$7 , 000 & \$ 6,000 \
\text { Funiture } & 10,000& 2,000 & ( 3,000 ) \
\text { Building } & 90,000 & 20,000 & 15,000
\end{array}$$ Assuming Suzanne'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 Suzanne's tax liability?

Accepted Answer

$6,000 ordinary gain, $12,000 unrecaptur

Question 11

Which of the following is not true regarding an asset's adjusted basis?

Accepted Answer

A) Tax-adjusted basis is usually greater than book-adjusted basis. 
B) Tax-adjusted basis is usually less than book-adjusted basis. 
C) Adjusted basis is cost basis less cost recovery deductions. 
D) Tax-adjusted basis may change over time. 
A) Tax-adjusted basis is usually greater than book-adjusted basis. 
B) Tax-adjusted basis is usually less than book-adjusted basis. 
C) Adjusted basis is cost basis less cost recovery deductions. 
D) Tax-adjusted basis may change over time.

Question 12

Buzz Corporation sold an office building that it used in its business for $500,000.Buzz bought the building 10 years ago for $650,000 and has claimed $200,000 of depreciation expense.What is the amount and character of Buzz's gain or loss?

Accepted Answer

$10,000 ordinary and $40,000 §

Question 13

A taxpayer that receives boot in a like-kind exchange resulting in a gain recognizes as gain the lesser of the fair market value of the boot received or the gain realized.

Accepted Answer

A) True 
 B)False

Question 14

Silver sold machinery that it used in its business to Gold, a related entity, for $55,000.Silver bought the equipment a few years ago for $50,000 and has claimed $15,000 of depreciation expense.What is the amount and character of Silver's gain?

Accepted Answer

$20,000 of ordinary income und

Question 15

Explain whether the sale at a loss of a machine used in a trade or business generates an ordinary or capital loss?

Accepted Answer

The sale at a loss of a machine used in

Question 16

The general rule regarding the exchanged basis in the new property received in a like-kind exchange is:

Accepted Answer

A) The basis is equal to the fair market value of the new property. 
B) The basis is equal to the fair market value of the old property. 
C) The basis is equal to the adjusted basis of the old property. 
D) The basis is equal to the cost basis of the old property. 
E) All of the choices are correct. 
A) The basis is equal to the fair market value of the new property. 
B) The basis is equal to the fair market value of the old property. 
C) The basis is equal to the adjusted basis of the old property. 
D) The basis is equal to the cost basis of the old property. 
E) All of the choices are correct.

Question 17

§1231 assets include all assets used in a trade or business.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is true regarding disallowed losses between related taxpayers?

Accepted Answer

A) The tax laws essentially treat related parties as the same taxpayer. 
B) The holding period of the seller carries over to the buyer. 
C) The related person always receives a carryover basis. 
D) The seller's realized loss is deferred until the buyer sells the assets. 
E) None of the choices are correct. 
A) The tax laws essentially treat related parties as the same taxpayer. 
B) The holding period of the seller carries over to the buyer. 
C) The related person always receives a carryover basis. 
D) The seller's realized loss is deferred until the buyer sells the assets. 
E) None of the choices are correct.

Question 19

Brandon, an individual, began business four years ago and has never sold a §1231 asset.Brandon owned each of the assets for several years.In the current year, Brandon sold the following business assets: $$\begin{array} { l r r r r } 
& & { \text { Accurmulated } } \
\text { Asset } & \text { Original Cost } & \text { Depreciation } & \text { Gair/Loss } \
\text { Machirzery } & \$ 30,000 & \$ 7,000 & \$ 10,000 \
\text { Computers } & 10,006 & 6,000 & ( 2,000 ) \
\text { Building } & 90,000 & 20,000 & ( 2,000 )
\end{array}$$ Assuming Brandon's marginal ordinary income tax rate is 32 percent, what effect do the gains and losses have on Brandon's tax liability?

Accepted Answer

A) $7,000 ordinary income, $1,000 §1231 loss, and $1,920 tax liability. 
B) $6,000 ordinary income and $1,920 tax liability. 
C) $7,000 §1231 gain and $2,240 tax liability. 
D) $7,000 §1231 gain and $1,050 tax liability. 
E) None of the choices are correct. 
A) $7,000 ordinary income, $1,000 §1231 loss, and $1,920 tax liability. 
B) $6,000 ordinary income and $1,920 tax liability. 
C) $7,000 §1231 gain and $2,240 tax liability. 
D) $7,000 §1231 gain and $1,050 tax liability. 
E) None of the choices are correct.

Question 20

Which one of the following is not a requirement of a deferred like-kind exchange?

Accepted Answer

A) The like-kind property to be received must be identified within 45 days. 
B) The exchange must be completed within the taxable year. 
C) The like-kind property must be received within 180 days. 
D) The exchanged property must be like-kind. 
E) All of the choices are correct. 
A) The like-kind property to be received must be identified within 45 days. 
B) The exchange must be completed within the taxable year. 
C) The like-kind property must be received within 180 days. 
D) The exchanged property must be like-kind. 
E) All of the choices are correct.

Which of the following may qualify as an installment sale?

Jessie sold a piece of land held for investment for $250,000.Jessie bought the land two years ago for $195,000.What is the amount and character of Jessie's gain?

Only accelerated depreciation is recaptured for §1245 assets.

Which one of the following is not considered boot in a like-kind exchange?

How long after the initial exchange does a taxpayer have to identify replacement property in a like-kind exchange?

A net §1231 gain becomes ordinary while a net §1231 loss becomes long-term capital gain.

Realized gains are recognized unless there is specific exception.

The amount realized is the sale proceeds less the adjusted basis.

Alpha sold machinery that it used in its business to Beta, a related entity, for $40,000.Beta used the machinery in its business.Alpha bought the machinery a few years ago for $50,000 and has claimed $30,000 of depreciation expense.What is the amount and character of Alpha's gain?

Which of the following is not true regarding an asset's adjusted basis?

Buzz Corporation sold an office building that it used in its business for $500,000.Buzz bought the building 10 years ago for $650,000 and has claimed $200,000 of depreciation expense.What is the amount and character of Buzz's gain or loss?

A taxpayer that receives boot in a like-kind exchange resulting in a gain recognizes as gain the lesser of the fair market value of the boot received or the gain realized.

Silver sold machinery that it used in its business to Gold, a related entity, for $55,000.Silver bought the equipment a few years ago for $50,000 and has claimed $15,000 of depreciation expense.What is the amount and character of Silver's gain?

Explain whether the sale at a loss of a machine used in a trade or business generates an ordinary or capital loss?

The general rule regarding the exchanged basis in the new property received in a like-kind exchange is:

§1231 assets include all assets used in a trade or business.

Which of the following is true regarding disallowed losses between related taxpayers?

Which one of the following is not a requirement of a deferred like-kind exchange?

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

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Exam 11: Property Dispositions

Which of the following may qualify as an installment sale?

Jessie sold a piece of land held for investment for $250,000.Jessie bought the land two years ago for $195,000.What is the amount and character of Jessie's gain?

Only accelerated depreciation is recaptured for §1245 assets.

Which one of the following is not considered boot in a like-kind exchange?

How long after the initial exchange does a taxpayer have to identify replacement property in a like-kind exchange?

A net §1231 gain becomes ordinary while a net §1231 loss becomes long-term capital gain.

Realized gains are recognized unless there is specific exception.

The amount realized is the sale proceeds less the adjusted basis.

Alpha sold machinery that it used in its business to Beta, a related entity, for $40,000.Beta used the machinery in its business.Alpha bought the machinery a few years ago for $50,000 and has claimed $30,000 of depreciation expense.What is the amount and character of Alpha's gain?

Which of the following is not true regarding an asset's adjusted basis?

Buzz Corporation sold an office building that it used in its business for $500,000.Buzz bought the building 10 years ago for $650,000 and has claimed $200,000 of depreciation expense.What is the amount and character of Buzz's gain or loss?

A taxpayer that receives boot in a like-kind exchange resulting in a gain recognizes as gain the lesser of the fair market value of the boot received or the gain realized.

Silver sold machinery that it used in its business to Gold, a related entity, for $55,000.Silver bought the equipment a few years ago for $50,000 and has claimed $15,000 of depreciation expense.What is the amount and character of Silver's gain?

Explain whether the sale at a loss of a machine used in a trade or business generates an ordinary or capital loss?

The general rule regarding the exchanged basis in the new property received in a like-kind exchange is:

§1231 assets include all assets used in a trade or business.

Which of the following is true regarding disallowed losses between related taxpayers?

Which one of the following is not a requirement of a deferred like-kind exchange?

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