Question 1

The amount realized is the sale proceeds less the adjusted basis.

Accepted Answer

A) True 
 B)False

Question 2

The sale of machinery for more than the original cost basis (before depreciation),used in a trade or business,and held for more than one year results in the following types of gain or loss?

Accepted Answer

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

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

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?

Accepted Answer

A)  $25,000 ordinary and $50,000 unrecaptured §1250 gain. 
B)  $25,000 §1231 gain and $50,000 unrecaptured §1250 gain. 
C)  $75,000 ordinary gain. 
D)  $75,000 capital gain. 
E)  None of the choices are correct. 
A)  $25,000 ordinary and $50,000 unrecaptured §1250 gain. 
B)  $25,000 §1231 gain and $50,000 unrecaptured §1250 gain. 
C)  $75,000 ordinary gain. 
D)  $75,000 capital gain. 
E)  None of the choices are correct.

Question 5

Brandon,an individual,began business four years ago and has sold §1231 assets with $5,000 of losses within the last 5 years.Brandon owned each of the assets for several years.In the current year,Brandon sold the following business assets:   Assuming Brandon's marginal ordinary income tax rate is 35 percent,what effect do the gains and losses have on Brandon's tax liability?

Accepted Answer

A)  $25,000 ordinary income, $8,750 tax liability. 
B)  $25,000 §1231 gain and $3,750 tax liability. 
C)  $13,000 §1231 gain, $12,000 ordinary income, and $6,150 tax liability. 
D)  $12,000 §1231 gain, $13,000 ordinary income, and $6,350 tax liability. 
E)  None of the choices are correct. 
A)  $25,000 ordinary income, $8,750 tax liability. 
B)  $25,000 §1231 gain and $3,750 tax liability. 
C)  $13,000 §1231 gain, $12,000 ordinary income, and $6,150 tax liability. 
D)  $12,000 §1231 gain, $13,000 ordinary income, and $6,350 tax liability. 
E)  None of the choices are correct.

Question 6

§1231 assets include all assets used in a trade or business.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

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 9

Unrecaptured §1250 gains apply only to individuals.

Accepted Answer

A) True 
 B)False

Question 10

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 11

Bull Run sold a computer for $1,200 on November 10th 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?

Accepted Answer

$600 loss realized.
The gain o

Question 12

Which of the following sections does not recapture or recharacterize a taxpayer's gain?

Accepted Answer

A)  §1239. 
B)  §1250. 
C)  §1245. 
D)  §291. 
E)  None of the choices are correct. 
A)  §1239. 
B)  §1250. 
C)  §1245. 
D)  §291. 
E)  None of the choices are correct.

Question 13

Collins Corporation,of Camden,Maine,wants to exchange its manufacturing equipment for Rockland Company's equipment.Both parties agree that Collins's machinery is worth $200,000 and that Rockland's machinery is worth $175,000.Collins will not enter into the transaction unless it qualifies as a like-kind exchange.If Collins wants to avoid gain,what could the parties do to equalize the value exchanged but still allow the exchange to qualify as a like-kind exchange?

Accepted Answer

Rockland could equalize the transaction

Question 14

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 15

Realized gains are recognized unless there is specific exception.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

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 18

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 19

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 20

Accounts receivable and inventory are examples of ordinary assets.

Accepted Answer

A) True 
 B)False

The amount realized is the sale proceeds less the adjusted basis.

The sale of machinery for more than the original cost basis (before depreciation),used in a trade or business,and held for more than one year results in the following types of gain or loss?

Depreciation recapture changes both the amount and character of a 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?

§1231 assets include all assets used in a trade or business.

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

Which of the following is NOT true regarding installment sales?

Unrecaptured §1250 gains apply only to individuals.

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?

Which of the following sections does not recapture or recharacterize a taxpayer's gain?

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

Realized gains are recognized unless there is specific exception.

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

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

Accounts receivable and inventory are examples of ordinary assets.

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, Neorganization, and Liquidation

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

State and Local Taxes

The Ustaxation of Multinational Transactions

Transfer Taxes and Wealth Planning

Filters

Exam 3: Property Dispositions

The amount realized is the sale proceeds less the adjusted basis.

The sale of machinery for more than the original cost basis (before depreciation),used in a trade or business,and held for more than one year results in the following types of gain or loss?

Depreciation recapture changes both the amount and character of a 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?

§1231 assets include all assets used in a trade or business.

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

Which of the following is NOT true regarding installment sales?

Unrecaptured §1250 gains apply only to individuals.

Bull Run sold a computer for $1,200 on November 10th 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?

Which of the following sections does not recapture or recharacterize a taxpayer's gain?

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

Realized gains are recognized unless there is specific exception.

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

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

Accounts receivable and inventory are examples of ordinary assets.

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, Neorganization, and Liquidation

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

State and Local Taxes

The Ustaxation of Multinational Transactions

Transfer Taxes and Wealth Planning

Filters

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?