Exam 10: Property Dispositions

Alexandra sold equipment that she uses in her business for $100,000.Alexandra bought the equipment two years ago for $90,000 and has claimed $25,000 of depreciation expense.What is the amount and character of Alexandra's gain or loss?

Which of the following is true regarding depreciation recapture?

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

Tyson had a parcel of undeveloped investment land that he wanted to trade for a warehouse to be used in his business.He found a buyer willing to pay him $450,000 for the land.He transferred the land to a third party intermediary on April 1st of the current year.On May 10th,with the help of a commercial real estate agent,Tyson identified two suitable warehouses.On August 10th he made an offer on the first building which was rejected.On August 13th an offer was accepted on the second warehouse.On September 23rd the third party intermediary transferred $500,000 ($450,000 from the original property plus $50,000 from Tyson)to the seller and conveyed title to the warehouse to Tyson.Explain whether the exchange of property qualifies as a like-kind exchange.

How long after the initial exchange does a taxpayer have to identify replacement property in a like-kind exchange?

Which of the following results in an ordinary gain or loss?

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

Gainesville LLC sold the following business assets during the current year: (1)machinery,$20,000 cost basis,$4,000 depreciation,proceeds $22,000; (2)automobile,$15,000 cost basis,$12,000 depreciation,proceeds $7,000; (3)equipment,$15,000 cost basis,$10,000 depreciation,proceeds $4,000; (4)computer equipment,$35,000 cost basis,$16,000 depreciation,proceeds $15,000; (5)Winchester had unrecaptured §1231 losses of $5,000 in the prior 5 years.What is the amount and character of Winchester's gains and losses before the 1231 netting process?

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?

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?

Generally,the amount realized is everything of value received in a sale less selling expenses.

Misha traded computer equipment used in her business to a computer dealer for some new computer equipment.Misha originally purchased the computer equipment for $15,000 and it had an adjusted basis of $11,000 at the time of the exchange. The computer equipment was worth $12,000 at the time of the exchange.Misha also received a used copier worth $2,000 in the transaction.What is Misha's realized and recognized gain/loss on the exchange?

Sumner sold equipment that it uses in its business for $30,000.Sumner bought the equipment a few years ago for $80,000 and has claimed $40,000 of depreciation expense.Assuming that this is Sumner's only disposition during the year,what is the amount and character of Sumner's gain or loss?

Which one of the following is not considered boot in a like-kind exchange?

Odintz traded land for land.Odintz originally purchased its land for $150,000.The land received was purchased for $200,000 and was subject to a mortgage of $50,000 that was paid off before the transfer.The fair market value of the new land is $240,000.What is Odintz's adjusted basis in the new land after the exchange?

Only accelerated depreciation is recaptured for §1245 assets.

Silver sold machinery to Gold,a related entity,which it used in its business for $55,000.Silver bought the equipment a few years ago for $50,000 and has claimed $15,000 of depreciation expense.What is the amount and character of Silver's gain?

Sarah sold 1,000 shares of stock to her brother,David,for $18,000 more than a year ago.Sarah had purchased the stock for $20,000 several years earlier.What is the amount and character of David's recognized gain or loss in the current year if he sells the stock for $15,000 and $25,000,respectively?

Which of the following realized gains results in a recognized gain?

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?