Exam 8: Property Dispositions

A fire completely destroyed a warehouse owned by Della Company and used for nine years in its shipping business.Della's adjusted basis in the warehouse was $748,200,and its replacement value was $1 million.Unfortunately,the warehouse was uninsured.As a result of the destruction,Della recognizes:

Lenoci Inc.paid $310,000 for equipment three years ago.This year,it sold the equipment for $200,000.Through date of sale,accumulated book depreciation was $93,840 and accumulated tax depreciation was $147,327.Which of the following statements is true?

This year,Ms.Lucas sold investment land for $125,000 cash plus the purchaser's assumption of a $50,000 mortgage on the land.Ms.Lucas's tax basis in the land was $93,000.If any recognized gain is taxed at 15 percent,compute the after-tax cash flow from the sale.

Langtry Corporation recognized $798,000 ordinary income,$13,000 net Section 1231 loss,and $6,000 net capital loss this year.Langtry's taxable income is $785,000.

The installment sale method of accounting does not apply to which of the following sales?

"Tiny Dancer" is the name of a bronze figurine created by artist Diego Ossa.The owner recently recognized a $43,500 gain on sale of the figurine.Which of the following statements is false?

The gain or loss recognized on any disposition of a capital asset is characterized as capital gain or loss.

Mr.Hickem sold an investment asset worth $20,000.The purchaser paid Mr.Hickem by giving him $12,500 cash and an oil painting worth $7,500.Mr.Hickem's amount realized on sale is $12,500.

Two months ago,Dawes Inc.broke a multi-year lease on office space that it had occupied for four years.Three years ago,Dawes paid $85,300 to install carpeting and new electrical fixtures throughout the office.Accumulated depreciation through the date that Dawes vacated the office was $51,000.What is the tax consequence of Dawes' abandonment of the carpeting and fixtures?

Several years ago,Y&S Inc.purchased a patent on a production process for $250,000 and has amortized $91,000 of the cost.Y&S has learned that a rival company recently developed a new process that renders the patent worthless.Consequently,Y&S made a public announcement that it would no longer enforce the patent.What is the tax consequence to Y&S of this unfortunate situation?

Dender Company sold business equipment with a $386,000 initial cost basis and $171,000 accumulated tax depreciation.Compute Dender's recaptured ordinary income and Section 1231 gain or loss recognized if the amount realized on sale was: a.$200,000 b.$300,000 c.$400,000

Which of the following assets is not a Section 1231 asset?

Verno Inc.purchased business equipment in March and sold it in November.Verno's gain or loss recognized on the sale is ordinary.

Warsham Inc.sold land with a $300,000 basis to Sara Phillips for $117,000 cash.Sara owns 68 percent of Warsham's outstanding stock.Which of the following statements is true?

Nancy owned business equipment with a $16,950 adjusted basis and a $7,500 FMV that was destroyed by a tornado.The equipment was uninsured.As a result of this casualty,Nancy:

Six years ago,Alejo Company purchased real property by paying $250,000 cash and giving the seller its $1 million note for the balance of the purchase price.This year,Alejo deducted $30,800 depreciation on the property and made a $125,000 principal payment on the note.Which of the following statements is false?

O&V sold a business asset with a $78,300 adjusted tax basis for $100,000.The purchaser paid $30,000 in cash and gave O&V a note for the $70,000 balance of the price.O&V will not receive a payment on the note until next year.Compute O&V's gain recognized under the installment sale method.

Inventory,accounts receivable,and machinery used in a business are examples of capital assets.

Which of the following is a capital asset?

R&T Inc.made the following sales of capital assets this year. What is the effect of the three sales on R&T's taxable income this year?