Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

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

Question 5

Bateman Corporation sold an office building that it used in its business for $800,000.Bateman bought the building ten years ago for $600,000 and has claimed $200,000 of depreciation expense. What is the amount and character of Bateman's gain or loss?

Accepted Answer

A)  $200,000 ordinary and $200,000 §1231 gain. 
B)  $400,000 ordinary gain. 
C)  $40,000 ordinary and $360,000 §1231 gain. 
D)  $400,000 capital gain. 
E)  None of the choices are correct. 
A)  $200,000 ordinary and $200,000 §1231 gain. 
B)  $400,000 ordinary gain. 
C)  $40,000 ordinary and $360,000 §1231 gain. 
D)  $400,000 capital gain. 
E)  None of the choices are correct.

Question 6

Which of the following is true regarding the §1231 look-back rule?

Accepted Answer

A)  It only applies when a §1231 gain occurs and there is a nonrecaptured §1231 loss in the prior five years. 
B)  It only applies when a §1231 loss occurs. 
C)  It only applies when a §1231 gain occurs and there is a nonrecaptured §1231 gain in the prior five years. 
D)  It only applies when a §1231 gain occurs. 
E)  None of the choices are correct. 
A)  It only applies when a §1231 gain occurs and there is a nonrecaptured §1231 loss in the prior five years. 
B)  It only applies when a §1231 loss occurs. 
C)  It only applies when a §1231 gain occurs and there is a nonrecaptured §1231 gain in the prior five years. 
D)  It only applies when a §1231 gain occurs. 
E)  None of the choices are correct.

Question 7

Each of the following is true except for:

Accepted Answer

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

Question 8

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 in next year. What is the amount and character of the gain that Raven will recognize in the current year?

Accepted Answer

$42,500 ga

Question 9

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

Question 10

Arlington LLC traded machinery used in its business to a machinery dealer for some new machinery. Arlington originally purchased the machinery for $60,000 and it had anadjusted basis of $28,000 at the time of the exchange. The new machinery had a fair market value of $35,000. Arlington also received $2,000 of office equipment in the transaction. What is Arlington's gain or loss recognized on the exchange?

Accepted Answer

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

Question 11

A simultaneous exchange must take place for a transaction to qualify as a like-kind exchange.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

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 180 days. 
B)  There is no deadline for the identification of replacement property. 
C)  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. 
D)  The like-kind property to be received must be identified within 45 days. 
E)  All of the choices are correct. 
A)  The like-kind property to be received must be identified within 180 days. 
B)  There is no deadline for the identification of replacement property. 
C)  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. 
D)  The like-kind property to be received must be identified within 45 days. 
E)  All of the choices are correct.

Question 14

Reid had a business building destroyed in a fire. The old building was purchased for $375,000 and$60,000 of depreciation deductions had been taken. Although the old building had a fair market value of $425,000 at the time of the fire, his insurance proceeds were limited to $400,000. Reidfound qualified replacement property which he acquired six months later for $390,000. What is theamount of Reid's realized gain and recognized gain?

Accepted Answer

$85,000 realized gain and $10,000 recogn

Question 15

Andrea sold a piece of machinery she used in her business for 9 months. The amount realized was$50,000 and the adjusted basis was $55,000. What is Andrea's gain or loss realized and what is the character of the gain or loss?

Accepted Answer

$5,000 ordinary loss.
The real

Question 16

Ashburn reported a $105,000 net §1231 gain in year 6. Assuming Ashburn reported$60,000 of nonrecaptured §1231 losses during years 1-5, what amount of Ashburn's net§1231 gain for year 6, if any, is treated as ordinary income?

Accepted Answer

A)  $105,000. 
B)  $45,000. 
C)  $60,000. 
D)  $0. 
E)  None of the choices are correct. 
A)  $105,000. 
B)  $45,000. 
C)  $60,000. 
D)  $0. 
E)  None of the choices are correct.

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

Redoubt LLC traded machinery used in its business to a machinery dealer for some new machinery.Redoubt originally purchased the machinery for $80,000 and it had an adjusted basis of $53,000 at the time of the exchange. The new machinery had a fair market value of $62,000. Redoubt alsoreceived $7,000 of computer equipment in the transaction. What is Redoubt's gain or lossrecognized on the exchange?

Accepted Answer

$7,000 gain.
The gain recognized is the

Question 19

Which of the following transactions results solely in §1245 gain?

Accepted Answer

A)  Sale of land held for more than one year and where the amount realized exceeds the adjusted basis. 
B)  Sale of machinery held for more than one year and where the accumulated depreciation exceeds the gain realized. 
C)  Sale of machinery held for less than one year. 
D)  Sale of machinery held for more than one year and where the gain realized exceeds the accumulated depreciation. 
E)  None of the choices are correct. 
A)  Sale of land held for more than one year and where the amount realized exceeds the adjusted basis. 
B)  Sale of machinery held for more than one year and where the accumulated depreciation exceeds the gain realized. 
C)  Sale of machinery held for less than one year. 
D)  Sale of machinery held for more than one year and where the gain realized exceeds the accumulated depreciation. 
E)  None of the choices are correct.

Question 20

Kristi had a business building destroyed in an earthquake. The old building was purchased for$250,000 and $80,000 of depreciation deductions had been taken. Her insurance proceeds were$550,000. Although the replacement property was much larger and nicer than her old building, Kristi's new property qualified as replacement property. She acquired the new property 13 months after the earthquake for $620,000. What is the amount of Kristi's realized gain and recognized gain and the basis in her new property?

Accepted Answer

$380,000 realized gain, $0 recognized ga

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

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

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

Alpha sold machinery, which 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?

Bateman Corporation sold an office building that it used in its business for $800,000.Bateman bought the building ten years ago for $600,000 and has claimed $200,000 of depreciation expense. What is the amount and character of Bateman's gain or loss?

Which of the following is true regarding the §1231 look-back rule?

Each of the following is true except for:

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

A simultaneous exchange must take place for a transaction to qualify as a like-kind exchange.

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

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

Andrea sold a piece of machinery she used in her business for 9 months. The amount realized was$50,000 and the adjusted basis was $55,000. What is Andrea's gain or loss realized and what is the character of the gain or loss?

Ashburn reported a $105,000 net §1231 gain in year 6. Assuming Ashburn reported$60,000 of nonrecaptured §1231 losses during years 1-5, what amount of Ashburn's net§1231 gain for year 6, if any, is treated as ordinary income?

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

Which of the following transactions results solely in §1245 gain?

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Exemptions, and Filing Status

Gross Income and Exclusions

Individual Deductions

Investments

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Compensation

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

Entities Overview

Corporate Operations

Accounting for Income Taxes

Corporate Taxation: Nonliquidating Distributions

Corporate Formation, Reorganization, and Liquidation

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

State and Local Taxes

The US Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning

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Exam 11: Property Dispositions

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

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

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

Alpha sold machinery, which 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?

Bateman Corporation sold an office building that it used in its business for $800,000.Bateman bought the building ten years ago for $600,000 and has claimed $200,000 of depreciation expense. What is the amount and character of Bateman's gain or loss?

Which of the following is true regarding the §1231 look-back rule?

Each of the following is true except for:

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

A simultaneous exchange must take place for a transaction to qualify as a like-kind exchange.

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

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

Andrea sold a piece of machinery she used in her business for 9 months. The amount realized was$50,000 and the adjusted basis was $55,000. What is Andrea's gain or loss realized and what is the character of the gain or loss?

Ashburn reported a $105,000 net §1231 gain in year 6. Assuming Ashburn reported$60,000 of nonrecaptured §1231 losses during years 1-5, what amount of Ashburn's net§1231 gain for year 6, if any, is treated as ordinary income?

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

Which of the following transactions results solely in §1245 gain?

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Exemptions, and Filing Status

Gross Income and Exclusions

Individual Deductions

Investments

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Compensation

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

Entities Overview

Corporate Operations

Accounting for Income Taxes

Corporate Taxation: Nonliquidating Distributions

Corporate Formation, Reorganization, and Liquidation

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

State and Local Taxes

The US Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning

Filters