Question 1

A corporation can use the installment sale method of accounting for both book and tax purposes.

Accepted Answer

A) True 
 B)False

Question 2

Stone Company recognized a $7,700 loss on sale of depreciable equipment held for three years.If Stone's accumulated MACRS depreciation on the equipment is $7,700 or more,the entire loss is ordinary.

Accepted Answer

A) True 
 B)False

Question 3

The characterization of income as ordinary or capital gain has no relevance for financial reporting purposes.

Accepted Answer

A) True 
 B)False

Question 4

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.

Accepted Answer

A) True 
 B)False

Question 5

The installment sale method of accounting applies to which of the following?

Accepted Answer

A) $89,300 gain realized on sale of business inventory. 
B) $798,600 gain realized on sale of common stock in a publicly held corporation. 
C) ($41,500)loss realized on sale of land used in a trade or business. 
D) None of the above 
A) $89,300 gain realized on sale of business inventory. 
B) $798,600 gain realized on sale of common stock in a publicly held corporation. 
C) ($41,500)loss realized on sale of land used in a trade or business. 
D) None of the above

Question 6

Because land is nondepreciable,it is always a capital asset.

Accepted Answer

A) True 
 B)False

Question 7

The installment sale method of accounting does not apply to which of the following sales?

Accepted Answer

A) Sale of 12-acre tract of land held as inventory by a real estate developer 
B) Sale of business equipment 
C) Sale of U.S.Treasury notes 
D) The method does not apply to the sale of 12-acre tract of land held as inventory by a real estate developer or to the sale of U.S.Treasury. 
A) Sale of 12-acre tract of land held as inventory by a real estate developer 
B) Sale of business equipment 
C) Sale of U.S.Treasury notes 
D) The method does not apply to the sale of 12-acre tract of land held as inventory by a real estate developer or to the sale of U.S.Treasury.

Question 8

Michael sold machinery used in his business for $50,000.He purchased the equipment three years ago for $55,000 and deducted $22,800 MACRS depreciation through the date of sale.Compute and characterize Michael's gain on sale.

Accepted Answer

A) $17,800 Section 1231 gain 
B) $22,800 ordinary gain and $45,000 Section 1231 loss 
C) $17,800 ordinary gain 
D) $17,800 capital gain 
A) $17,800 Section 1231 gain 
B) $22,800 ordinary gain and $45,000 Section 1231 loss 
C) $17,800 ordinary gain 
D) $17,800 capital gain

Question 9

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.

Accepted Answer

A) True 
 B)False

Question 10

The gain or loss recognized on any disposition of a capital asset is characterized as capital gain or loss.

Accepted Answer

A) True 
 B)False

Question 11

Mr.Hickem sold an investment asset worth $20,000.The purchaser paid Mr.Hickem by giving him $12,500 cash and an oil painting worth $7,500.Mr.Hickem's amount realized on sale is $12,500.

Accepted Answer

A) True 
 B)False

Question 12

This year,Ms Lucas sold investment land for $125,000 cash plus the purchaser's assumption of a $50,000 mortgage on the land.Ms.Lucas's tax basis in the land was $93,000.If any recognized gain is taxed at 15 percent,compute the after-tax cash flow from the sale.

Accepted Answer

A) $62,300 
B) $69,700 
C) $112,700 
D) $162,700 
A) $62,300 
B) $69,700 
C) $112,700 
D) $162,700

Question 13

The abandonment of business equipment with a $6,019 adjusted basis results in a $6,019 Section 1231 loss.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Thieves stole computer equipment owned by Eaton Company and used for three years in its consulting business.Eaton's adjusted basis in equipment was $23,200,and its replacement value was $50,000.Eaton's insurance company paid only $15,000 on Eaton's claim for the theft loss.As a result,Eaton recognizes:

Accepted Answer

A) $35,000 ordinary loss 
B) $8,200 Section 1231 loss 
C) $8,200 ordinary loss 
D) None of the above 
A) $35,000 ordinary loss 
B) $8,200 Section 1231 loss 
C) $8,200 ordinary loss 
D) None of the above

Question 16

Norbett Inc.generated $15,230,000 ordinary taxable income and realized a $238,000 net capital loss on the sale of marketable securities this year.Which of the following statements is false?

Accepted Answer

A) Norbett's net income per books includes the $238,000 net capital loss. 
B) Norbett's taxable income is $15,230,000. 
C) The $238,000 net capital loss is a favorable book/tax difference. 
D) The $238,000 net capital loss is a temporary book/tax difference. 
A) Norbett's net income per books includes the $238,000 net capital loss. 
B) Norbett's taxable income is $15,230,000. 
C) The $238,000 net capital loss is a favorable book/tax difference. 
D) The $238,000 net capital loss is a temporary book/tax difference.

Question 17

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

Accepted Answer

A) Business equipment held for four years 
B) Office furniture held for eight months 
C) Land used in a business and held for 16 years 
D) All of the above are Section 1231 assets 
A) Business equipment held for four years 
B) Office furniture held for eight months 
C) Land used in a business and held for 16 years 
D) All of the above are Section 1231 assets

Question 18

A taxpayer cannot compute its net Section 1231 gain or loss for a taxable year until the year closes.

Accepted Answer

A) True 
 B)False

Question 19

O&V sold an asset with a $78,300 adjusted tax basis for $100,000.The purchaser paid $30,000 in cash and assumed O&V's $70,000 mortgage on the asset.Compute O&V's net cash flow from the sale assuming a 35% tax rate.

Accepted Answer

A) $22,405 
B) $13,095 
C) $14,105 
D) None of the above 
A) $22,405 
B) $13,095 
C) $14,105 
D) None of the above

Question 20

Langtry Corporation recognized $798,000 ordinary income,$13,000 net Section 1231 loss,and $6,000 net capital loss this year.Langtry's taxable income is $785,000.

Accepted Answer

A) True 
 B)False

A corporation can use the installment sale method of accounting for both book and tax purposes.

Stone Company recognized a $7,700 loss on sale of depreciable equipment held for three years.If Stone's accumulated MACRS depreciation on the equipment is $7,700 or more,the entire loss is ordinary.

The characterization of income as ordinary or capital gain has no relevance for financial reporting 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.

The installment sale method of accounting applies to which of the following?

Because land is nondepreciable,it is always a capital asset.

The installment sale method of accounting does not apply to which of the following sales?

Michael sold machinery used in his business for $50,000.He purchased the equipment three years ago for $55,000 and deducted $22,800 MACRS depreciation through the date of sale.Compute and characterize Michael's gain on sale.

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.

The gain or loss recognized on any disposition of a capital asset is characterized as capital gain or loss.

Mr.Hickem sold an investment asset worth $20,000.The purchaser paid Mr.Hickem by giving him $12,500 cash and an oil painting worth $7,500.Mr.Hickem's amount realized on sale is $12,500.

This year,Ms Lucas sold investment land for $125,000 cash plus the purchaser's assumption of a $50,000 mortgage on the land.Ms.Lucas's tax basis in the land was $93,000.If any recognized gain is taxed at 15 percent,compute the after-tax cash flow from the sale.

The abandonment of business equipment with a $6,019 adjusted basis results in a $6,019 Section 1231 loss.

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

Norbett Inc.generated $15,230,000 ordinary taxable income and realized a $238,000 net capital loss on the sale of marketable securities this year.Which of the following statements is false?

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

A taxpayer cannot compute its net Section 1231 gain or loss for a taxable year until the year closes.

O&V sold an asset with a $78,300 adjusted tax basis for $100,000.The purchaser paid $30,000 in cash and assumed O&V's $70,000 mortgage on the asset.Compute O&V's net cash flow from the sale assuming a 35% tax rate.

Langtry Corporation recognized $798,000 ordinary income,$13,000 net Section 1231 loss,and $6,000 net capital loss this year.Langtry's taxable income is $785,000.

Taxes and Taxing Jurisdictions

Policy Standards for a Good Tax

Taxes As Transaction Costs

Maxims of Income Tax Planning

Tax Research

Taxable Income From Business Operations

Property Acquisitions and Cost Recovery Deductions

Nontaxable Exchanges

Sole Proprietorships, Partnerships, llcs, and S Corporations

The Corporate Taxpayer

The Choice of Business Entity

Jurisdictional Issues in Business Taxation

The Individual Tax Formula

Compensation and Retirement Planning

Investment and Personal Financial Planning

Tax Consequences of Personal Activities

The Tax Compliance Process

Filters

Exam 8: Property Dispositions

A corporation can use the installment sale method of accounting for both book and tax purposes.

Stone Company recognized a $7,700 loss on sale of depreciable equipment held for three years.If Stone's accumulated MACRS depreciation on the equipment is $7,700 or more,the entire loss is ordinary.

The characterization of income as ordinary or capital gain has no relevance for financial reporting 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.

The installment sale method of accounting applies to which of the following?

Because land is nondepreciable,it is always a capital asset.

The installment sale method of accounting does not apply to which of the following sales?

Michael sold machinery used in his business for $50,000.He purchased the equipment three years ago for $55,000 and deducted $22,800 MACRS depreciation through the date of sale.Compute and characterize Michael's gain on sale.

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.

The gain or loss recognized on any disposition of a capital asset is characterized as capital gain or loss.

Mr.Hickem sold an investment asset worth $20,000.The purchaser paid Mr.Hickem by giving him $12,500 cash and an oil painting worth $7,500.Mr.Hickem's amount realized on sale is $12,500.

This year,Ms Lucas sold investment land for $125,000 cash plus the purchaser's assumption of a $50,000 mortgage on the land.Ms.Lucas's tax basis in the land was $93,000.If any recognized gain is taxed at 15 percent,compute the after-tax cash flow from the sale.

The abandonment of business equipment with a $6,019 adjusted basis results in a $6,019 Section 1231 loss.

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

Norbett Inc.generated $15,230,000 ordinary taxable income and realized a $238,000 net capital loss on the sale of marketable securities this year.Which of the following statements is false?

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

A taxpayer cannot compute its net Section 1231 gain or loss for a taxable year until the year closes.

O&V sold an asset with a $78,300 adjusted tax basis for $100,000.The purchaser paid $30,000 in cash and assumed O&V's $70,000 mortgage on the asset.Compute O&V's net cash flow from the sale assuming a 35% tax rate.

Langtry Corporation recognized $798,000 ordinary income,$13,000 net Section 1231 loss,and $6,000 net capital loss this year.Langtry's taxable income is $785,000.

Taxes and Taxing Jurisdictions

Policy Standards for a Good Tax

Taxes As Transaction Costs

Maxims of Income Tax Planning

Tax Research

Taxable Income From Business Operations

Property Acquisitions and Cost Recovery Deductions

Nontaxable Exchanges

Sole Proprietorships, Partnerships, llcs, and S Corporations

The Corporate Taxpayer

The Choice of Business Entity

Jurisdictional Issues in Business Taxation

The Individual Tax Formula

Compensation and Retirement Planning

Investment and Personal Financial Planning

Tax Consequences of Personal Activities

The Tax Compliance Process

Filters