Question 1

§1239 recharacterizes 50 percent of the gain on sales to a related party as ordinary income.

Accepted Answer

A) True 
 B)False

Question 2

Alpha sold machinery,which it used in its business,to Beta,a related entity,for $40,000.Beta used the machinery in its business.Alpha bought the machinery a few years ago for $50,000 and has claimed $30,000 of depreciation expense.What is the amount and character of Alpha's gain?

Accepted Answer

A)  $20,000 ordinary income under §1239. 
B)  $10,000 ordinary gain and $10,000 §1231 gain. 
C)  $20,000 ordinary gain. 
D)  $20,000 capital gain. 
E)  None of the choices are correct. 
A)  $20,000 ordinary income under §1239. 
B)  $10,000 ordinary gain and $10,000 §1231 gain. 
C)  $20,000 ordinary gain. 
D)  $20,000 capital gain. 
E)  None of the choices are correct.

Question 3

Foreaker LLC sold a piece of land that it uses in its business for $52,000.Foreaker bought the land two years ago for $42,500.What is the amount and character of Foreaker's gain?

Accepted Answer

A)  $9,500 §1221. 
B)  $9,500 §1231. 
C)  $9,500 §1245. 
D)  $9,500 §1250. 
E)  None of the choices are correct. 
A)  $9,500 §1221. 
B)  $9,500 §1231. 
C)  $9,500 §1245. 
D)  $9,500 §1250. 
E)  None of the choices are correct.

Question 4

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

Accepted Answer

A)  $20,000. 
B)  $24,000. 
C)  $36,000. 
D)  $40,000. 
E)  None of the choices are correct. 
A)  $20,000. 
B)  $24,000. 
C)  $36,000. 
D)  $40,000. 
E)  None of the choices are correct.

Question 5

Residential real property is not like-kind with non-residential real property.

Accepted Answer

A) True 
 B)False

Question 6

Koch traded machine 1 for machine 2.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?

Accepted Answer

A)  $40,000. 
B)  $50,000. 
C)  $55,000. 
D)  $75,000. 
E)  None of the choices are correct. 
A)  $40,000. 
B)  $50,000. 
C)  $55,000. 
D)  $75,000. 
E)  None of the choices are correct.

Question 7

An installment sale is any sale where at least a portion of the sales proceeds is received in a subsequent taxable year.

Accepted Answer

A) True 
 B)False

Question 8

Kristi had a business building destroyed in an earthquake.The old building was purchased for $250,000 and $80,000 of depreciation deductions had been taken.Her insurance proceeds were $550,000.Although the replacement property was much larger and nicer than her old building,Kristi's new property qualified as replacement property.She acquired the new property 13 months after the earthquake for $620,000.What is the amount of Kristi's realized gain and recognized gain and the basis in her new property?

Accepted Answer

$380,000 realized gain,$0 recognized gai

Question 9

The adjusted basis is the cost basis less cost recovery deductions.

Accepted Answer

A) True 
 B)False

Question 10

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 11

Explain whether the sale of a machine used in a trade or business that is sold at a loss generates an ordinary or capital loss?

Accepted Answer

The sale of a machine used in a trade or

Question 12

Losses on sales between related parties are realized but not recognized.

Accepted Answer

A) True 
 B)False

Question 13

After application of the look-back rule,net §1231 gains become capital while net §1231 losses become ordinary.

Accepted Answer

A) True 
 B)False

Question 14

Leesburg sold a machine for $2,200 on November 10ᵗʰ of the current year.The machine was purchased for $2,600.Leesburg had taken $1,200 of depreciation deductions on the machine through the date of the sale.What is Leesburg's gain or loss realized on the machine?

Accepted Answer

A)  $800 gain. 
B)  $1,000 gain. 
C)  $1,200 loss. 
D)  $1,400 loss. 
E)  None of the choices are correct. 
A)  $800 gain. 
B)  $1,000 gain. 
C)  $1,200 loss. 
D)  $1,400 loss. 
E)  None of the choices are correct.

Question 15

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 16

§1250 recaptures the excess of accelerated depreciation over straight line depreciation on real property placed in service between 1981 and 1986 as ordinary income.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

$85,000 realized gain and $10,000 recogn

Question 18

An asset's tax adjusted basis is usually greater than its book adjusted basis.

Accepted Answer

A) True 
 B)False

Question 19

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 20

Redoubt LLC traded machinery used in its business to a machinery dealer for some new machinery.Redoubt originally purchased the machinery for $80,000 and it had an adjusted basis of $53,000 at the time of the exchange.The new machinery had a fair market value of $62,000.Redoubt also received $7,000 of computer equipment in the transaction.What is Redoubt's gain or loss recognized on the exchange?

Accepted Answer

$7,000 gain.
The gain recognized is the

§1239 recharacterizes 50 percent of the gain on sales to a related party as ordinary income.

Alpha sold machinery,which it used in its business,to Beta,a related entity,for $40,000.Beta used the machinery in its business.Alpha bought the machinery a few years ago for $50,000 and has claimed $30,000 of depreciation expense.What is the amount and character of Alpha's gain?

Foreaker LLC sold a piece of land that it uses in its business for $52,000.Foreaker bought the land two years ago for $42,500.What is the amount and character of Foreaker's gain?

Residential real property is not like-kind with non-residential real property.

An installment sale is any sale where at least a portion of the sales proceeds is received in a subsequent taxable year.

The adjusted basis is the cost basis less cost recovery deductions.

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

Explain whether the sale of a machine used in a trade or business that is sold at a loss generates an ordinary or capital loss?

Losses on sales between related parties are realized but not recognized.

After application of the look-back rule,net §1231 gains become capital while net §1231 losses become ordinary.

Leesburg sold a machine for $2,200 on November 10ᵗʰ of the current year.The machine was purchased for $2,600.Leesburg had taken $1,200 of depreciation deductions on the machine through the date of the sale.What is Leesburg's gain or loss realized on the machine?

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

§1250 recaptures the excess of accelerated depreciation over straight line depreciation on real property placed in service between 1981 and 1986 as ordinary income.

An asset's tax adjusted basis is usually greater than its book 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?

An Introduction to Tax

Tax Compliance, The IRS and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Exemptions, and Filing Status

Gross Income and Exclusions

Individual Deductions

Investments

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Compensation

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

Filters

Exam 11: Property Dispositions

§1239 recharacterizes 50 percent of the gain on sales to a related party as ordinary income.

Alpha sold machinery,which it used in its business,to Beta,a related entity,for $40,000.Beta used the machinery in its business.Alpha bought the machinery a few years ago for $50,000 and has claimed $30,000 of depreciation expense.What is the amount and character of Alpha's gain?

Foreaker LLC sold a piece of land that it uses in its business for $52,000.Foreaker bought the land two years ago for $42,500.What is the amount and character of Foreaker's gain?

Residential real property is not like-kind with non-residential real property.

An installment sale is any sale where at least a portion of the sales proceeds is received in a subsequent taxable year.

The adjusted basis is the cost basis less cost recovery deductions.

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

Explain whether the sale of a machine used in a trade or business that is sold at a loss generates an ordinary or capital loss?

Losses on sales between related parties are realized but not recognized.

After application of the look-back rule,net §1231 gains become capital while net §1231 losses become ordinary.

Leesburg sold a machine for $2,200 on November 10ᵗʰ of the current year.The machine was purchased for $2,600.Leesburg had taken $1,200 of depreciation deductions on the machine through the date of the sale.What is Leesburg's gain or loss realized on the machine?

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

§1250 recaptures the excess of accelerated depreciation over straight line depreciation on real property placed in service between 1981 and 1986 as ordinary income.

An asset's tax adjusted basis is usually greater than its book 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?

An Introduction to Tax

Tax Compliance, The IRS and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Exemptions, and Filing Status

Gross Income and Exclusions

Individual Deductions

Investments

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Compensation

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

Filters