Question 1

The sale of land held for investment results in the following type of gain or loss?

Accepted Answer

A)  Capital. 
B)  Ordinary. 
C)  §1231. 
D)  §1245. 
E)  None of the choices are correct. 
A)  Capital. 
B)  Ordinary. 
C)  §1231. 
D)  §1245. 
E)  None of the choices are correct. A

Question 2

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

Question 3

All tax gains and losses are ultimately characterized as either ordinary or capital.

Accepted Answer

A) True 
 B)False  True

Question 4

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

Accepted Answer

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

Question 5

Realized gains are recognized unless there is specific exception.

Accepted Answer

A) True 
 B)False

Question 6

Unrecaptured §1250 gain is taxed at a maximum rate of 25 percent.

Accepted Answer

A) True 
 B)False

Question 7

What is the primary purpose of a third-party intermediary in a deferred like-kind exchange?

Accepted Answer

A)  To facilitate finding replacement property. 
B)  To help acquire the replacement property. 
C)  To prevent the seller from receiving cash (boot) that will taint the transaction. 
D)  To certify the taxpayer's Form 8824. 
E)  All of the choices are correct. 
A)  To facilitate finding replacement property. 
B)  To help acquire the replacement property. 
C)  To prevent the seller from receiving cash (boot) that will taint the transaction. 
D)  To certify the taxpayer's Form 8824. 
E)  All of the choices are correct.

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 gain recognized: $40,000 ordinar

Question 9

Which of the following is not True regarding installment sales?

Accepted Answer

A)  Only gains are eligible for installment sale reporting. 
B)  Depreciation recapture is deferred in an installment sale. 
C)  The gross profit percentage is needed to determine the annual gain recognized. 
D)  Stock sales are ineligible for installment sale treatment. 
E)  None of the choices are correct. 
A)  Only gains are eligible for installment sale reporting. 
B)  Depreciation recapture is deferred in an installment sale. 
C)  The gross profit percentage is needed to determine the annual gain recognized. 
D)  Stock sales are ineligible for installment sale treatment. 
E)  None of the choices are correct.

Question 10

Winchester LLC sold the following business assets during the current year:
(1) automobile, $30,000 cost basis, $12,000 depreciation, proceeds $20,000
(2) machinery, $25,000 cost basis, $20,000 depreciation, proceeds $10,000
(3) furniture, $15,000 cost basis, $10,000 depreciation, proceeds $4,000
(4) computer equipment, $25,000 cost basis, $6,000 depreciation, proceeds $10,000
(5) Winchester had unrecaptured §1231 losses of $3,000 in the prior 5 years.
What is the amount and character of Winchester's gains and losses before the 1231 netting process?  Assume all assets were held for more than one year.

Accepted Answer

A)  $3,000 ordinary loss, $0 §1231 loss. 
B)  $7,000 ordinary gain, $10,000 §1231 loss. 
C)  $7,000 ordinary loss, $4,000 §1231 gain. 
D)  $1,000 ordinary gain, $4,000 §1231 loss. 
E)  None of the choices are correct. 
A)  $3,000 ordinary loss, $0 §1231 loss. 
B)  $7,000 ordinary gain, $10,000 §1231 loss. 
C)  $7,000 ordinary loss, $4,000 §1231 gain. 
D)  $1,000 ordinary gain, $4,000 §1231 loss. 
E)  None of the choices are correct.

Question 11

For corporations, §291 recaptures 20 percent of the lesser of depreciation taken or the realized gain as ordinary income.

Accepted Answer

A) True 
 B)False

Question 12

Butte sold a machine to a machine dealer for $50,000. Butte bought the machine for $55,000 several years ago and has claimed $12,500 of depreciation expense on the machine. What is the amount and character of Butte's gain or loss?

Accepted Answer

A)  $7,500 §1231 loss. 
B)  $5,000 §1231 loss. 
C)  $7,500 ordinary gain. 
D)  $7,500 capital gain. 
E)  None of the choices are correct. 
A)  $7,500 §1231 loss. 
B)  $5,000 §1231 loss. 
C)  $7,500 ordinary gain. 
D)  $7,500 capital gain. 
E)  None of the choices are correct.

Question 13

Which of the following realized gains results in a recognized gain?

Accepted Answer

A)  Farm machinery traded for farm machinery. 
B)  Sale to a related party. 
C)  Involuntary conversion. 
D)  Iowa cropland exchanged for a Minnesota warehouse. 
A)  Farm machinery traded for farm machinery. 
B)  Sale to a related party. 
C)  Involuntary conversion. 
D)  Iowa cropland exchanged for a Minnesota warehouse.

Question 14

Which of the following results in an ordinary gain or loss?

Accepted Answer

A)  Sale of a machine at a gain. 
B)  Sale of stock held for investment. 
C)  Sale of a §1231 asset. 
D)  Sale of inventory. 
E)  None of the choices are correct. 
A)  Sale of a machine at a gain. 
B)  Sale of stock held for investment. 
C)  Sale of a §1231 asset. 
D)  Sale of inventory. 
E)  None of the choices are correct.

Question 15

Taxpayers can recognize a taxable gain on the sale of an asset even though an asset's real economic value has declined.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is how gain or loss realized is calculated?

Accepted Answer

A)  Cash less selling costs. 
B)  Cost basis less cost recovery. 
C)  Cash less cost recovery. 
D)  Amount realized less adjusted basis. 
E)  None of the choices are correct. 
A)  Cash less selling costs. 
B)  Cost basis less cost recovery. 
C)  Cash less cost recovery. 
D)  Amount realized less adjusted basis. 
E)  None of the choices are correct.

Question 17

The gain or loss realized on the sale of an asset is the amount realized less the adjusted basis.

Accepted Answer

A) True 
 B)False

Question 18

Brandy sold a rental house that she owned for $150,000. Brandy bought the house four years ago for $140,000 and has claimed $25,000 of depreciation expense. What is the amount and character of Brandy's gain or loss?

Accepted Answer

$10,000 §1231 gain and $25,000 unrecaptu

Question 19

Which of the following is True regarding depreciation recapture?

Accepted Answer

A)  Changes the character of a loss. 
B)  Changes the character of a gain. 
C)  Changes the amount of a gain. 
D)  Only applies to ordinary assets. 
E)  None of the choices are correct. 
A)  Changes the character of a loss. 
B)  Changes the character of a gain. 
C)  Changes the amount of a gain. 
D)  Only applies to ordinary assets. 
E)  None of the choices are correct.

Question 20

Sarah sold 1,000 shares of stock to her brother, David, for $18,000 more than a year ago. Sarah had purchased the stock for $20,000 several years earlier. What is the amount and character of David's recognized gain or loss in the current year if he sells the stock for $15,000 and $25,000, respectively?

Accepted Answer

$3,000 long-term capital loss if sold fo

The sale of land held for investment results in the following type of gain or loss?

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?

All tax gains and losses are ultimately characterized as either ordinary or capital.

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

Realized gains are recognized unless there is specific exception.

Unrecaptured §1250 gain is taxed at a maximum rate of 25 percent.

What is the primary purpose of a third-party intermediary in a deferred like-kind exchange?

Which of the following is not True regarding installment sales?

For corporations, §291 recaptures 20 percent of the lesser of depreciation taken or the realized gain as ordinary income.

Butte sold a machine to a machine dealer for $50,000. Butte bought the machine for $55,000 several years ago and has claimed $12,500 of depreciation expense on the machine. What is the amount and character of Butte's gain or loss?

Which of the following realized gains results in a recognized gain?

Which of the following results in an ordinary gain or loss?

Taxpayers can recognize a taxable gain on the sale of an asset even though an asset's real economic value has declined.

Which of the following is how gain or loss realized is calculated?

The gain or loss realized on the sale of an asset is the amount realized less the adjusted basis.

Brandy sold a rental house that she owned for $150,000. Brandy bought the house four years ago for $140,000 and has claimed $25,000 of depreciation expense. What is the amount and character of Brandy's gain or loss?

Which of the following is True regarding depreciation recapture?

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

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 U.S. Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning

Filters

Exam 3: Property Dispositions

The sale of land held for investment results in the following type of gain or loss?

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?

All tax gains and losses are ultimately characterized as either ordinary or capital.

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

Realized gains are recognized unless there is specific exception.

Unrecaptured §1250 gain is taxed at a maximum rate of 25 percent.

What is the primary purpose of a third-party intermediary in a deferred like-kind exchange?

Which of the following is not True regarding installment sales?

For corporations, §291 recaptures 20 percent of the lesser of depreciation taken or the realized gain as ordinary income.

Butte sold a machine to a machine dealer for $50,000. Butte bought the machine for $55,000 several years ago and has claimed $12,500 of depreciation expense on the machine. What is the amount and character of Butte's gain or loss?

Which of the following realized gains results in a recognized gain?

Which of the following results in an ordinary gain or loss?

Taxpayers can recognize a taxable gain on the sale of an asset even though an asset's real economic value has declined.

Which of the following is how gain or loss realized is calculated?

The gain or loss realized on the sale of an asset is the amount realized less the adjusted basis.

Brandy sold a rental house that she owned for $150,000. Brandy bought the house four years ago for $140,000 and has claimed $25,000 of depreciation expense. What is the amount and character of Brandy's gain or loss?

Which of the following is True regarding depreciation recapture?

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

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 U.S. Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning

Filters