Exam 3: Property Dispositions

Alpha sold machinery that it used in its business to Beta, a related entity, for $40,050. Beta used the machinery in its business. Alpha bought the machinery a few years ago for $49,950 and has claimed $30,050 of depreciation expense. What is the amount and character of Alpha's gain?

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

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

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

When do unrecaptured §1250 gains apply?

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

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

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

In a deferred like-kind exchange, the like-kind property to be received must be identified within 45 days and acquired within 180 days from the initial exchange.

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

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

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. Reid found qualified replacement property that he acquired six months later for $390,000. What is the amount of Reid's realized gain and recognized gain?

Only accelerated depreciation is recaptured for §1245 assets.

The general rule regarding the exchanged basis in the new property received in a like-kind exchange is:

§1250 recaptures the excess of accelerated depreciation over straight-line depreciation on real property placed in servicebefore 1987 as ordinary income.

The §1231 look-back rule recharacterizes §1231 gains if §1231 losses have created ordinary losses in the last five years.

Arlington LLC exchanged land used in its business for some new land. Arlington originally purchased the land it exchanged for $28,000. The new land had a fair market value of $35,000. Arlington also received $2,000 of office equipment in the transaction. What is Arlington'srecognized gain or loss on the exchange?

Luke sold land valued at $210,000. His original basis in the land was $180,000. For the land, Luke received $60,000 in cash in the current year and a note providing $150,000 in the subsequent year. What is Luke's recognized gain in the current and subsequent year, respectively?

Bateman Corporation sold an office building that it used in its business for $800,000. Bateman bought the building 10 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?

Bull Run sold a computer for $1,200 on November 10 ^th of the current year. The computer was purchased for $2,800. Bull Run had taken $1,000 of depreciation deductions. What is Bull Run's gain or loss realized on the computer?