Question 1

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 2

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 3

Which of the following is not an involuntary conversion?

Accepted Answer

A) Destruction caused by a hurricane. 
B) Imminent domain. 
C) A foreclosure. 
D) Fire damage. 
E) All of these choices are involuntary conversions. 
A) Destruction caused by a hurricane. 
B) Imminent domain. 
C) A foreclosure. 
D) Fire damage. 
E) All of these choices are involuntary conversions.

Question 4

A net §1231 gain becomes ordinary while a net §1231 loss becomes long-term capital gain.

Accepted Answer

A) True 
 B)False

Question 5

For corporations,§291 recaptures 20 percent of the lesser of depreciation taken or the realized gain as ordinary income.

Accepted Answer

A) True 
 B)False

Question 6

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 7

Butte sold a machine to a machine dealer for $50,000.Butte bought the machine for $55,000 several years ago and has claimed $12,500 of depreciation expense on the machine.What is the amount and character of Butte's gain or loss?

Accepted Answer

A) $7,500 §1231 loss. 
B) $5,000 §1231 loss. 
C) $7,500 ordinary gain. 
D) $7,500 capital gain. 
E) None of the choices are correct. 
A) $7,500 §1231 loss. 
B) $5,000 §1231 loss. 
C) $7,500 ordinary gain. 
D) $7,500 capital gain. 
E) None of the choices are correct.

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

Winchester LLC sold the following business assets during the current year: (1)automobile,$30,000 cost basis,$12,000 depreciation,proceeds $20,000; (2)machinery,$25,000 cost basis,$20,000 depreciation,proceeds $10,000; (3)furniture,$15,000 cost basis,$10,000 depreciation,proceeds $4,000; (4)computer equipment,$25,000 cost basis,$6,000 depreciation,proceeds $10,000; (5)Winchester had unrecaptured §1231 losses of $3,000 in the prior 5 years.What is the amount and character of Winchester's gains and losses before the 1231 netting process?  Assume all assets were held for more than one year.

Accepted Answer

A) $3,000 ordinary loss,$0 §1231 loss. 
B) $7,000 ordinary gain,$10,000 §1231 loss. 
C) $7,000 ordinary loss,$4,000 §1231 gain. 
D) $1,000 ordinary gain,$4,000 §1231 loss. 
E) None of the choices are correct. 
A) $3,000 ordinary loss,$0 §1231 loss. 
B) $7,000 ordinary gain,$10,000 §1231 loss. 
C) $7,000 ordinary loss,$4,000 §1231 gain. 
D) $1,000 ordinary gain,$4,000 §1231 loss. 
E) None of the choices are correct.

Question 10

Andrew,an individual,began business four years ago and has never sold a §1231 asset.Andrew owned each of the assets for several years.In the current year,Andrew sold the following business assets:
 $\begin{array}{lccc}
&&\text { Accumulated }\
\text {Asset}&\text { Original Cost } & \text { Depreciation } & {\text { Gain/Loss }} \
\text {Machinery}&\$ 12,000& \$ 7,000 & \$ 6,000 \
\text {Furniture}&10,000& 2,000 & 3,000 \
\text {Building}&90,000 & 20,000 &  (5,000)
\end{array}$ Assuming Andrew's marginal ordinary income tax rate is 32 percent,what is the character of the gains and losses and what affect do they have on Andrew's tax liability?

Accepted Answer

$4,000 ordinary income and $1,280 of tax

Question 11

Which of the following is not true regarding §1239?

Accepted Answer

A) It only applies to related taxpayers. 
B) It only applies to gains on sales of depreciable property. 
C) It only applies to gains on sales of non-residential real property. 
D) It does not apply to losses. 
E) None of the choices are correct. 
A) It only applies to related taxpayers. 
B) It only applies to gains on sales of depreciable property. 
C) It only applies to gains on sales of non-residential real property. 
D) It does not apply to losses. 
E) None of the choices are correct.

Question 12

What is the character of land used in an active trade or business for two years?

Accepted Answer

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

Question 13

Sandra sold some equipment for $10,000 in cash,$1,000 of office products,the buyer assumption of her $1,500 loan,and incurred selling expenses of $500.What is the Sandra's amount realized in the transaction?

Accepted Answer

$12,000. The amount realized i

Question 14

Which of the following gains does not result solely in an ordinary gain or loss?

Accepted Answer

A) Sale of equipment held for less than a year. 
B) Sale of inventory. 
C) Sale of equipment where the gain realized exceeds the accumulated depreciation. 
D) Sale of equipment where the accumulated depreciation exceeds the gain realized. 
E) None of the choices are correct. 
A) Sale of equipment held for less than a year. 
B) Sale of inventory. 
C) Sale of equipment where the gain realized exceeds the accumulated depreciation. 
D) Sale of equipment where the accumulated depreciation exceeds the gain realized. 
E) None of the choices are correct.

Question 15

Unrecaptured §1250 gains apply only to individuals.

Accepted Answer

A) True 
 B)False

Question 16

Redoubt LLC exchanged an office building used in its business for a rental house.Redoubt originally purchased the building for $80,000 and it had an adjusted basis of $53,000 at the time of the exchange.The rental house had a fair market value of $62,000.Redoubt also received $7,000 of cash in the transaction.What is Redoubt's gain or loss recognized on the exchange? What is Redoubt's basis in the rental house?

Accepted Answer

$7,000 gain.$53,000 basis in the rental

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

A taxpayer that receives boot in a like-kind exchange resulting in a gain recognizes as gain the lesser of the fair market value of the boot received or the gain realized.

Accepted Answer

A) True 
 B)False

Question 19

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

Which of the following does not ultimately result in a capital gain or loss?

Accepted Answer

A) Sale of a personal use asset. 
B) Sale of inventory. 
C) Gain on equipment used in a trade or business held for more than one year,if it is the only asset sale during the year. 
D) Sale of capital stock in another company. 
E) None of the choices are correct. 
A) Sale of a personal use asset. 
B) Sale of inventory. 
C) Gain on equipment used in a trade or business held for more than one year,if it is the only asset sale during the year. 
D) Sale of capital stock in another company. 
E) None of the choices are correct.

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?

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

Which of the following is not an involuntary conversion?

A net §1231 gain becomes ordinary while a net §1231 loss becomes long-term capital gain.

For corporations,§291 recaptures 20 percent of the lesser of depreciation taken or the realized gain as ordinary income.

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

Butte sold a machine to a machine dealer for $50,000.Butte bought the machine for $55,000 several years ago and has claimed $12,500 of depreciation expense on the machine.What is the amount and character of Butte's gain or loss?

Which of the following is not true regarding installment sales?

Which of the following is not true regarding §1239?

What is the character of land used in an active trade or business for two years?

Sandra sold some equipment for $10,000 in cash,$1,000 of office products,the buyer assumption of her $1,500 loan,and incurred selling expenses of $500.What is the Sandra's amount realized in the transaction?

Which of the following gains does not result solely in an ordinary gain or loss?

Unrecaptured §1250 gains apply only to individuals.

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

A taxpayer that receives boot in a like-kind exchange resulting in a gain recognizes as gain the lesser of the fair market value of the boot received or the gain realized.

Which of the following does not ultimately result in a capital gain or loss?

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview dependents and Filing Status

Gross Income and Exclusions

Individual for Agi Deductions

Individual Income Tax Computation and Tax Credits

Business Income, deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Entities Overview

Corporate Formations and Operations

Corporate Nonliquidating and Liquidating Distributions

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

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Individual From Agi Deductions

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Exam 10: Property Dispositions

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?

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

Which of the following is not an involuntary conversion?

A net §1231 gain becomes ordinary while a net §1231 loss becomes long-term capital gain.

For corporations,§291 recaptures 20 percent of the lesser of depreciation taken or the realized gain as ordinary income.

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

Butte sold a machine to a machine dealer for $50,000.Butte bought the machine for $55,000 several years ago and has claimed $12,500 of depreciation expense on the machine.What is the amount and character of Butte's gain or loss?

Which of the following is not true regarding installment sales?

Which of the following is not true regarding §1239?

What is the character of land used in an active trade or business for two years?

Sandra sold some equipment for $10,000 in cash,$1,000 of office products,the buyer assumption of her $1,500 loan,and incurred selling expenses of $500.What is the Sandra's amount realized in the transaction?

Which of the following gains does not result solely in an ordinary gain or loss?

Unrecaptured §1250 gains apply only to individuals.

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

A taxpayer that receives boot in a like-kind exchange resulting in a gain recognizes as gain the lesser of the fair market value of the boot received or the gain realized.

Which of the following does not ultimately result in a capital gain or loss?

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview dependents and Filing Status

Gross Income and Exclusions

Individual for Agi Deductions

Individual Income Tax Computation and Tax Credits

Business Income, deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Entities Overview

Corporate Formations and Operations

Corporate Nonliquidating and Liquidating Distributions

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

Individual From Agi Deductions

Filters