Question 1

The sale of computer equipment used in a trade or business for 9 months results in the following type of gain or loss?

Accepted Answer

A)  Capital. 
B)  Ordinary. 
C)  §1231. 
D)  §1245. 
E)  None of these. 
A)  Capital. 
B)  Ordinary. 
C)  §1231. 
D)  §1245. 
E)  None of these. B

Question 2

A simultaneous exchange must take place for a transaction to qualify as a like-kind exchange.

Accepted Answer

A) True 
 B)False  False

Question 3

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

Accepted Answer

A)  $20,000. 
B)  $24,000. 
C)  $36,000. 
D)  $40,000. 
E)  None of these. 
A)  $20,000. 
B)  $24,000. 
C)  $36,000. 
D)  $40,000. 
E)  None of these. B

Question 4

In a deferred like-kind exchange the like-kind property to be received must be identified within 45 days and acquired within 180 days from the initial exchange.

Accepted Answer

A) True 
 B)False

Question 5

The gain or loss realized is the amount realized less the adjusted basis.

Accepted Answer

A) True 
 B)False

Question 6

Sunshine LLC sold furniture for $75,000. Sunshine bought the furniture for $90,000 several years ago and has claimed $25,000 of depreciation expense on the machine. What is the amount and character of Sunshine's gain or loss?

Accepted Answer

$10,000 or

Question 7

The §1231 look-back rule applies whether there is a net gain or loss.

Accepted Answer

A) True 
 B)False

Question 8

Odintz traded machinery for machinery. Odintz originally purchased its machine for $150,000 and the adjusted basis was $90,000 at the time of the exchange. The machinery received was purchased for $200,000, had an adjusted basis of $155,000 at the time of the exchange, and was subject to a mortgage of $50,000 that was paid off before the transfer. What is Odintz's adjusted basis in the new machinery after the exchange?

Accepted Answer

The answer of Odintz traded machinery for machinery. Odintz originally...

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

A parcel of land is always a capital asset.

Accepted Answer

A) True 
 B)False

Question 11

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.

Accepted Answer

Yes, the exchange of

Question 12

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 these. 
A)  Capital and Ordinary. 
B)  Ordinary only. 
C)  Capital and §1231. 
D)  §1245 and §1231. 
E)  None of these.

Question 13

Sadie sold 10 shares of stock to her brother, George, for $500 six months ago. Sadie had purchased the stock for $600 two years earlier. If George sells the stock for $700, what is the amount and character of his recognized gain or loss in the current year?

Accepted Answer

A)  $0. 
B)  $100 short-term capital gain. 
C)  $100 long-term capital gain. 
D)  $200 short-term capital gain. 
E)  None of these. 
A)  $0. 
B)  $100 short-term capital gain. 
C)  $100 long-term capital gain. 
D)  $200 short-term capital gain. 
E)  None of these.

Question 14

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?

Accepted Answer

A)  $10,000 §1231 loss. 
B)  $10,000 §1245 loss. 
C)  $50,000 ordinary loss. 
D)  $10,000 capital loss. 
E)  None of these. 
A)  $10,000 §1231 loss. 
B)  $10,000 §1245 loss. 
C)  $50,000 ordinary loss. 
D)  $10,000 capital loss. 
E)  None of these.

Question 15

Which of the following may qualify as an installment sale?

Accepted Answer

A)  Sale of inventory at a gain. 
B)  Sale of securities. 
C)  Sale of asset used in a business at a gain. 
D)  Land sold at a loss. 
E)  All of these are true. 
A)  Sale of inventory at a gain. 
B)  Sale of securities. 
C)  Sale of asset used in a business at a gain. 
D)  Land sold at a loss. 
E)  All of these are true.

Question 16

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?

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 these. 
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 these.

Question 17

For a like-kind exchange, realized gain is deferred if the exchange is solely for like-kind property.

Accepted Answer

A) True 
 B)False

Question 18

Each of the following is true except for:

Accepted Answer

A)  A direct involuntary conversion occurs when property taken under imminent domain is replaced with other property. 
B)  Qualified replacement property rules are more restrictive than the like-kind property rules. 
C)  An indirect involuntary conversion occurs when property is destroyed and insurance proceeds are used to purchase qualified replacement property. 
D)  Losses realized in involuntary conversions are deferred. 
E)  All of these are true. 
A)  A direct involuntary conversion occurs when property taken under imminent domain is replaced with other property. 
B)  Qualified replacement property rules are more restrictive than the like-kind property rules. 
C)  An indirect involuntary conversion occurs when property is destroyed and insurance proceeds are used to purchase qualified replacement property. 
D)  Losses realized in involuntary conversions are deferred. 
E)  All of these are true.

Question 19

Only accelerated depreciation is recaptured for §1245 assets.

Accepted Answer

A) True 
 B)False

Question 20

Which one of the following is not a requirement of a deferred like-kind exchange?

Accepted Answer

A)  The like-kind property to be received must be identified within 45 days. 
B)  The exchange must be completed within the taxable year. 
C)  The like-kind property must be received within 180 days. 
D)  A third party intermediary is often used to facilitate the exchange. 
E)  All of these. 
A)  The like-kind property to be received must be identified within 45 days. 
B)  The exchange must be completed within the taxable year. 
C)  The like-kind property must be received within 180 days. 
D)  A third party intermediary is often used to facilitate the exchange. 
E)  All of these.

Exam 10: Property Dispositions

The sale of computer equipment used in a trade or business for 9 months results in the following type of gain or loss?

A simultaneous exchange must take place for a transaction to qualify as a like-kind exchange.

In a deferred like-kind exchange the like-kind property to be received must be identified within 45 days and acquired within 180 days from the initial exchange.

The gain or loss realized is the amount realized less the adjusted basis.

Sunshine LLC sold furniture for $75,000. Sunshine bought the furniture for $90,000 several years ago and has claimed $25,000 of depreciation expense on the machine. What is the amount and character of Sunshine's gain or loss?

The §1231 look-back rule applies whether there is a net gain or loss.

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

A parcel of land is always a capital asset.

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?

Sadie sold 10 shares of stock to her brother, George, for $500 six months ago. Sadie had purchased the stock for $600 two years earlier. If George sells the stock for $700, what is the amount and character of his recognized gain or loss in the current year?

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 of the following may qualify as an installment sale?

For a like-kind exchange, realized gain is deferred if the exchange is solely for like-kind property.

Each of the following is true except for:

Only accelerated depreciation is recaptured for §1245 assets.

Which one of the following is not a requirement of a deferred like-kind exchange?

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Exemptions, and Filing Status

Gross Income and Exclusions

Individual Deductions

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Investments

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Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

Entities Overview

Corporate Operations

Accounting for Income Taxes

Corporate Taxation: Nonliquidating Distributions

Corporate Formation, Reorganization, and Liquidation

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

State and Local Taxes

The Us Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning of the Cfa Institute

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