Exam 8: Property Dispositions

Steiger Company owned investment land subject to a $715,000 recourse mortgage.Steiger failed to make timely mortgage payments,so the creditor foreclosed.At date of foreclosure,Steiger's basis in the land was $587,300,and the land's appraised FMV was $690,000.Steiger completely settled its recourse debt by paying $25,000 cash to the creditor.As a result of the foreclosure,Steiger recognizes:

Mr.and Mrs.Marley operate a small business.This year,the Marleys sold a commercial office building used in their business for $1.1 million.They purchased the building in 2005 for a cost of $900,000 and have deducted $300,000 MACRS depreciation through date of sale.The Marleys should characterize the $500,000 gain recognized on sale as:

Schatz Corporation generated $8,083,000 ordinary business income and recognized a $73,900 net capital gain on the sale of assets.Which of the following statements is true?

This year,Izard Company sold equipment purchased several years ago at a cost of $48,500.Accumulated depreciation through date of sale was $12,900.Which of the following statements is false?

Acme Inc.sold three capital assets this year.The corporation realized an $18,900 gain on the first sale,a $93,000 loss on the second sale,and a $40,000 gain on the third sale.If Acme's ordinary taxable income from operations was $250,000,compute Acme's taxable income.

A taxpayer cannot compute its net Section 1231 gain or loss for a taxable year until the year closes.

Sandy Cole realized a loss on sale of an investment asset to her mother,Lynne.If the facts and circumstances prove that the selling price was an arm's length market price,Sandy can recognize the loss.

Twelve years ago,Mr.and Mrs.Bathgate purchased a business.This year,they sold the business for $750,000 lump-sum payment.The business had the following balance sheet assets. As a result of the sale,the Bathgates should recognize:

A fire destroyed business equipment that was worth $100,000 and had a $118,100 adjusted tax basis.The equipment was uninsured.The owner can recognize a $118,100 ordinary casualty loss.

For tax purposes,every asset is a capital asset unless it falls into one of eight categories of noncapital assets.

Philp Inc.sold equipment with a $132,900 adjusted tax basis for $200,000.The purchaser paid $20,000 in cash and assumed Philp's $180,000 mortgage on the asset.Compute Philp's net cash flow from the sale assuming a 21% tax rate.

Mr.and Mrs.Sykes operate a very profitable small business.This year,the Sykes recognized a $100,000 gain on sale of a trade name they had created and copyrighted for use in their business.Which of the following statements is true?

Skeen Company paid $90,000 for tangible personalty three years ago and elected to expense and deduct the cost under Section 179.This year,Skeen sold the personalty for $52,700.Accumulated book depreciation through date of sale was $31,000.What is the effect of the sale on Skeen's book income and taxable income?

Benlow Company,a calendar year taxpayer,sold two operating assets this year (each held for over a year).The first sale generated a $19,200 Section 1231 loss,and the second sale generated a $33,600 Section 1231 gain.As a result of these sales,Benlow should recognize:

A loss from an involuntary conversion of depreciable business property is characterized as a Section 1231 loss.

O&V sold an asset with a $78,300 adjusted tax basis for $100,000.The purchaser paid $30,000 in cash and assumed O&V's $70,000 mortgage on the asset.Compute O&V's net cash flow from the sale assuming a 21% tax rate.

Mrs.Tinker paid $78,400 to purchase 15,000 shares of HiFli common stock in 2009.This year,HiFli declared bankruptcy and announced that its stock has no value.What is the tax consequence to Mrs.Tinker of this bad news?

JG Inc.recognized $690,000 ordinary income,$48,000 net Section 1231 gain,and $77,000 net capital loss this year.JG's taxable income is $690,000.

The sale of business inventory always generates ordinary income or loss.

In 2018,TPC Inc.sold investment land with a $388,000 book and tax basis for $523,000.The purchaser paid $60,000 in cash and gave TPC a note for the $463,000 balance of the price.In 2019,TPC received a $67,800 payment on the note ($40,000 principal + $27,800 interest).In 2019,TPC's use of the installment sale method results in a: