Exam 8: Property Dispositions

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.

Tullia Inc. recognized $500,000 ordinary income, $22,600 net Section 1231 gain, and $6,000 net capital loss this year. Tullia's taxable income is $522,600.

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 gain is ordinary income.

Bastrop Inc. generated a $169,000 ordinary loss from operations this year. It also recognized $35,920 recaptured ordinary income, $18,000 net Section 1231 loss, and $125,750 net capital gain on the sale of assets. Compute Bastrop's net operating loss.

A fire completely destroyed a warehouse owned by Della Company and used for nine years in its shipping business. Della's adjusted basis in the warehouse was $748,200, and its replacement value was $1 million. Unfortunately, the warehouse was uninsured. As a result of the destruction, Della recognizes:

Both corporate and individual taxpayers can carry back a net capital loss to the three prior taxable years.

Lettuca Inc. generated a $77,050 ordinary loss from operations this year. It also recognized $5,920 recaptured ordinary income, $55,000 net Section 1231 loss, and $7,840 net capital loss on the sale of assets. Compute Lettuca's net operating loss.

Murrow Corporation generated $285,700 income from the performance of services for its clients. Murrow also sold several operating assets during the year. Compute Murrow's taxable income under each of the following assumptions about the tax consequences of the asset sales. a. Murrow recognized $6,800 recaptured ordinary income, a $23,200 net Section 1231 gain, and an $11,600 net capital loss. b. Murrow recognized a $47,300 net Section 1231 loss and a $5,075 net capital loss. c. Murrow recognized a $61,800 net Section 1231 gain and a $4,210 net capital gain. d. Murrow recognized a $15,300 net Section 1231 loss and a $3,000 net capital gain.

The use of the installment sale method can result in an unfavorable difference between book income and taxable income in the year of sale.

Every gain or loss realized on the disposition of property is ultimately characterized as either ordinary or capital for tax purposes.

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.

Nolan Inc. sold marketable securities with a $223,000 basis to Totem Company. Compute Nolan's recognized gain or loss assuming that: a. Nolan's amount realized on sale was $160,000, and Nolan and Totem are unrelated parties. b. Nolan's amount realized on sale was $275,000, and Nolan and Totem are unrelated parties. c. Nolan's amount realized on sale was $160,000, and Nolan and Totem are related parties. d. Nolan's amount realized on sale was $275,000, and Nolan and Totem are related parties.

JG Inc. recognized $690,000 ordinary income, $48,000 net Section 1231 gain, and $77,000 net capital loss this year. JG's taxable income is $690,000.

R&T Inc. made the following sales of capital assets this year. What is the effect of the three sales on R&T's taxable income this year?

Six years ago, Alejo Company purchased real property by paying $250,000 cash and giving the seller its $1 million note for the balance of the purchase price. This year, Alejo deducted $30,800 depreciation on the property and made a $125,000 principal payment on the note. Which of the following statements is false?

Which of the following is a capital asset?

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

Which of the following assets is not a Section 1231 asset?

In its current tax year, PRS Corporation generated $300,000 ordinary income from the performance of consulting services for its clients. PRS sold two assets, recognizing a $20,000 gain on the first sale and a $31,000 loss on the second sale. Which of the following statements is false?

Which of the following is a Section 1231 asset?