Exam 8: Property Dispositions

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?

Four years ago,Mrs.Beights purchased marketable securities for $75,000 cash.At the end of the current year,the FMV of the securities had plummeted to $4,000.Mrs.Beights may elect to recognize her $71,000 loss this year,even though she still owns the securities.

Dolzer Inc.sold a business asset with a $474,000 adjusted book and tax basis for $775,000.The purchaser paid $100,000 in cash and gave Dolzer a note for the $675,000 balance of the price.Dolzer will not receive a payment on the note until next year.Assuming that Dolzer uses the installment sale method,compute Dolzer's book and tax gain in the year of sale.

Which of the following is a capital asset?

Mr.Quick sold marketable securities with a $112,900 tax basis to his 100% owned corporation for $95,000 cash.Which of the following statements is true?

A fire destroyed business equipment that was worth $160,000 and had a $118,100 adjusted tax basis.The equipment was uninsured.The owner can recognize a $160,000 ordinary casualty loss.

Fantino Inc.was incorporated in 2015 and adopted a calendar year for tax purposes.Here is a schedule of Fantino's taxable income for 2015 and 2016.Use Corporate tax rate schedule. In 2017,Fantino generated $297,300 ordinary income and recognized a $14,000 net capital loss.Which of the following statements is true?

Mrs.Tinker paid $78,400 to purchase 15,000 shares of HiFli common stock in 2006.This year,HiFli declared bankruptcy and announced that its stock has no value.What is the tax consequence to Mrs.Tinker of this bad news?

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?

WQP Company generated $1,814,700 ordinary income from the sale of inventory to its customers.It also sold three noninventory assets during the year.Compute WQP's taxable income assuming that: a.The first sale resulted in a $10,400 ordinary gain,the second sale resulted in a $23,900 capital loss,and the third sale resulted in a $44,000 capital gain. b.The first sale resulted in a $79,100 capital loss,the second sale resulted in a $35,200 ordinary loss,and the third sale resulted in a $16,000 capital gain.

Ficia Inc.owned investment land subject to a $294,500 recourse mortgage.Ficia failed to make timely mortgage payments,so the creditor foreclosed.At date of foreclosure,Ficia's basis in the land was $300,000,and the land's appraised FMV was $260,000.The creditor informed Ficia that it would not pursue collection of the $34,500 unpaid balance of the mortgage.Which of the following statements is true?

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?

Kopel Company transferred an inventory asset to Cassim LLC in exchange for Cassim's $230,000 interest-bearing note.Kopel's tax basis in the note is its $230,000 face value.

Which of the following is a capital asset?

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.

This year,Izard Company sold equipment purchased several years ago at a cost of $48,500.Accumulated depreciation through date of sale was $18,900.Which of the following statements is false?

Which of the following is a Section 1231 asset?

The seller's amount realized on the sale of property equals any cash received plus the FMV of any property received plus any amount of debt relief to the seller.

Delour Inc.was incorporated in 2011 and adopted a calendar year.Here is a schedule of Delour's net Section 1231 gains and (losses)reported on its tax returns through 2016. In 2017,Delour recognized a $50,000 gain on the sale of business land.How is this gain characterized on Delour's tax return?

Lenoci Inc.paid $310,000 for equipment three years ago.This year,it sold the equipment for $200,000.Through date of sale,accumulated book depreciation was $93,840 and accumulated tax depreciation was $147,327.Which of the following statements is true?