Exam 3: Property Dispositions

Maryexchanged an office building used in her business for some land. Mary originally purchased the building for $45,000, and it had an adjusted basis of $20,000 at the time of the exchange. The land had a fair market value of $40,000. Mary also gave $4,000 to the seller in the transaction. What is Mary's adjusted basis in the land after the exchange?

Which of the following is not a §1245 asset if held for more than one year?

Accounts receivable and inventory are examples of ordinary assets.

Andrea sold a piece of machinery she used in her business for nine 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?

Silver sold machinerythat it used in its business to Gold, a related entity, for $55,000. Silver bought the equipment a few years ago for $50,000 and has claimed $15,000 of depreciation expense. What is the amount and character of Silver's gain?

Brad sold a rental house that he owned for $250,000. Brad bought the rental house five years ago for $225,000 and has claimed $50,000 of depreciation expense. What is the amount and character of Brad's 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 to 5, what amount of Ashburn's net §1231 gain for Year 6, if any, is treated as ordinary income?

Bateman Corporation sold an office building that it used in its business for $800,250. Bateman bought the building 10 years ago for $599,875 and has claimed $200,375 of depreciation expense. What is the amount and character of Bateman's gain or loss?

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

Misha traded computer equipment used in her business to a computer dealer for some new computer equipment. Misha originally purchased the computer equipment for $15,000, and it had an adjusted basis of $11,000 at the time of the exchange.The computer equipment was worth $12,000 at the time of the exchange. Misha also received a used copier worth $2,000 in the transaction. What is Misha's realized and recognized gain/loss on the exchange?

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?

Suzanne, an individual, began business four years ago and has never sold a §1231 asset. Suzanne owned each of the assets for several years. In the current year, Suzanne sold the following business assets: Assuming Suzanne's marginal ordinary income tax rate is 32 percent, what is the character of the gains and losses and what affect do they have on Suzanne's tax liability?

Koch traded Machine 1 for Machine 2when the fair market value of both machines was $50,000. Koch originally purchased Machine 1 for $75,000, and Machine 1's adjusted basis was $40,000 at the time of the exchange. Machine 2's seller purchased it for $65,000 and Machine 2's adjusted basis was $55,000 at the time of the exchange. What is Koch's adjusted basis in Machine 2 after the exchange?

Ashburn reported a $104,800 net §1231 gain in Year 6. Assuming Ashburn reported $51,000 of nonrecaptured §1231 losses during Years 1 to 5, what amount of Ashburn's net §1231 gain for Year 6, if any, is treated as ordinary income?

Sumner sold equipment that it uses in its business for $30,700. Sumner bought the equipment a few years ago for $79,650 and has claimed $39,825 of depreciation expense. Assuming that this is Sumner's only disposition during the year, what is the amount and character of Sumner's gain or loss?

Boot is not like-kind property involved in a like-kind exchange.

For a like-kind exchange, realized gain is deferred if the exchange is solely for like-kind property.

Frederique sold furniture that she uses in her business for $15,000. Frederique bought the furniture a few years ago for $40,000 and has claimed $20,000 of depreciation expense. What is the amount and character of Frederique's gain or loss?

Explain whether the saleat a loss of a machine used in a trade or business generates an ordinary or capital loss?

The saleat a loss of machinery that was used in a trade or business and held for more than one year results in which of the following types of loss?