Exam 8: Property Dispositions

Mrs. Stile owns investment land subject to a $600,000 nonrecourse mortgage. Her basis in the land is $212,000, and the land's appraised FMV is $575,000. Mrs. Stile is considering defaulting on the mortgage and allowing the creditor to foreclose. If Mrs. Stile disposes of the land through a foreclosure, she will recognize:

R&T Inc. made the following sales of capital assets this year. Tax Basis Sale Price Asset 1 \6 0,000 \6 8,100 Asset 2 250,000 263,500 Asset 3 50,000 22,400 What is the effect of the three sales on R&T's taxable income this year?

Which of the following is a Section 1231 asset?

This year, Izard Company sold equipment purchased several years ago at a cost of $48,500. Accumulated depreciation through date of sale was $18,900. Which of the following statements is false?

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.

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?

The abandonment of business equipment with a $6,019 adjusted basis results in a $6,019 Section 1231 loss.

This year, Adula Company sold equipment purchased in 2015 at a cost of $117,200. Accumulated depreciation through date of sale was $33,000. Which of the following statements is false?

Zeron Inc. generated $1,349,600 ordinary income from operations this year. It also recognized $29,200 recaptured ordinary income, $21,000 net Section 1231 gain, and $14,900 net capital loss on the sale of assets. Compute Zeron's taxable income.

Stone Company recognized a $7,700 loss on sale of depreciable equipment held for three years. If Stone's accumulated MACRS depreciation on the equipment is $7,700 or more, the entire loss is ordinary.

Milton Inc. recognized a $16,900 gain on sale of depreciable equipment held for three years. If Milton's accumulated MACRS depreciation on the equipment is $16,900 or more, the entire loss will be treated as ordinary as a result of the full recapture rule.

Delta Inc. generated $668,200 ordinary income from operations this year. It also recognized $3,910 recaptured ordinary income, $5,000 net Section 1231 gain, and $14,600 net capital loss on the sale of assets. Compute Delta's taxable income.

Several years ago, Nipher paid $70,000 to purchase equipment to use in its business. This year, it sold the equipment for $76,500. Accumulated MACRS depreciation through date of sale was $18,000. Determine the amount and character of Nipher's gain recognized.

In 2019, TPC Inc. sold investment land with a $474,000 book and tax basis for $775,000. The purchaser paid $100,000 in cash and gave TPC a note for the $675,000 balance of the price. In 2020, TPC received a $105,500 payment on the note ($67,500 principal + $38,000 interest). Assuming that TPC is using the installment sale method, compute its gain recognized in 2020.

Mr. Quick sold marketable securities with a $112,900 tax basis to his 100% owned corporation for $95,000 cash. Which of the following statements is true?

Mrs. Lex realized a $78,400 gain on sale of investment land to S&T, which issued a 10-year note in full payment. Mrs. Lex must recognize the gain in the year of sale unless she elects to use the installment sale method to recognize gain over the term of the note.

Mr. Quick sold marketable securities with a $112,900 tax basis to his son for $95,000 cash. Two years later, the son sold the securities through his broker for $90,000. Compute the son's loss recognized on sale.

If a taxpayer sells business realty that was depreciated using the straightline method, the entire gain is characterized as Section 1231 gain.

Winslow Company sold investment land to an unrelated purchaser. The purchaser paid $250,000 cash, assumed Winslow's $600,000 mortgage on the land, and gave Winslow its $580,000 ten-year, interest-bearing note. Compute Winslow's amount realized on sale.

The same asset may be an ordinary asset in the hands of one taxpayer and a capital asset in the hands of a different taxpayer.