Question 1

The gain or loss realized is always recognized for tax purposes.

Accepted Answer

A) True 
 B)False

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 usually included in an asset's tax basis?

Accepted Answer

A)  Purchase price 
B)  Sales tax 
C)  Shipping costs 
D)  Installation costs 
E)  None of these 
A)  Purchase price 
B)  Sales tax 
C)  Shipping costs 
D)  Installation costs 
E)  None of these

Question 4

The general rule regarding the exchanged basis in a like-kind exchange is:

Accepted Answer

A)  The basis is equal to the fair market value of the new property. 
B)  The basis is equal to the fair market value of the old property. 
C)  The basis is equal to the adjusted basis of the old property. 
D)  The basis is equal to the cost basis of the old property. 
E)  All of these. 
A)  The basis is equal to the fair market value of the new property. 
B)  The basis is equal to the fair market value of the old property. 
C)  The basis is equal to the adjusted basis of the old property. 
D)  The basis is equal to the cost basis of the old property. 
E)  All of these.

Question 5

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?

Accepted Answer

$42,500 gain recognized: $40,0

Question 6

Depreciation recapture changes both the amount and character of a gain.

Accepted Answer

A) True 
 B)False

Question 7

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. Misha also received a used copier worth $2,000 in the transaction. What is Misha's adjusted basis in the new equipment after the exchange?

Accepted Answer

The answer of Misha traded computer equipment used in her...

Question 8

Bateman Corporation sold an office building that it used in its business for $800,000. Bateman bought the building ten years ago for $600,000 and has claimed $200,000 of depreciation expense. What is the amount and character of Bateman's gain or loss?

Accepted Answer

A)  $40,000 ordinary and $360,000 §1231 gain. 
B)  $200,000 ordinary and $200,000 §1231 gain. 
C)  $400,000 ordinary gain. 
D)  $400,000 capital gain. 
E)  None of these. 
A)  $40,000 ordinary and $360,000 §1231 gain. 
B)  $200,000 ordinary and $200,000 §1231 gain. 
C)  $400,000 ordinary gain. 
D)  $400,000 capital gain. 
E)  None of these.

Question 9

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

Accepted Answer

A)  Sale of a machine at a gain. 
B)  Sale of stock held for investment. 
C)  Sale of a §1231 asset. 
D)  Sale of inventory. 
E)  None of these. 
A)  Sale of a machine at a gain. 
B)  Sale of stock held for investment. 
C)  Sale of a §1231 asset. 
D)  Sale of inventory. 
E)  None of these.

Question 10

For an installment sale, the gross profit percentage is the gain recognized divided by the gain realized.

Accepted Answer

A) True 
 B)False

Question 11

Foreaker LLC sold a piece of land that it uses in its business for $52,000. Foreaker bought the land two years ago for $42,500. What is the amount and character of Foreaker's gain?

Accepted Answer

A)  $9,500 §1221. 
B)  $9,500 §1231. 
C)  $9,500 §1245. 
D)  $9,500 §1250. 
E)  None of these. 
A)  $9,500 §1221. 
B)  $9,500 §1231. 
C)  $9,500 §1245. 
D)  $9,500 §1250. 
E)  None of these.

Question 12

Which of the following is true regarding the §1231 look-back rule?

Accepted Answer

A)  It only applies when a §1231 loss occurs. 
B)  It only applies when a §1231 gain occurs. 
C)  It only applies when a §1231 gain occurs and there is a nonrecaptured §1231 loss in the prior five years. 
D)  It only applies when a §1231 gain occurs and there is a nonrecaptured §1231 gain in the prior five years. 
E)  None of these. 
A)  It only applies when a §1231 loss occurs. 
B)  It only applies when a §1231 gain occurs. 
C)  It only applies when a §1231 gain occurs and there is a nonrecaptured §1231 loss in the prior five years. 
D)  It only applies when a §1231 gain occurs and there is a nonrecaptured §1231 gain in the prior five years. 
E)  None of these.

Question 13

Buzz Corporation sold an office building that it used in its business for $500,000. Buzz bought the building ten years ago for $650,000 and has claimed $200,000 of depreciation expense. What is the amount and character of Buzz's gain or loss?

Accepted Answer

$10,000 or

Question 14

Boot is not like-kind property involved in a like-kind exchange.

Accepted Answer

A) True 
 B)False

Question 15

Arlington LLC traded machinery used in its business to a machinery dealer for some new machinery. Arlington originally purchased the machinery for $60,000 and it had an adjusted basis of $28,000 at the time of the exchange. The new machinery had a fair market value of $35,000. Arlington also received $2,000 of office equipment in the transaction. What is Arlington's gain or loss recognized on the exchange?

Accepted Answer

A)  $0. 
B)  $2,000. 
C)  $7,000. 
D)  $9,000. 
E)  None of these. 
A)  $0. 
B)  $2,000. 
C)  $7,000. 
D)  $9,000. 
E)  None of these.

Question 16

When does unrecaptured §1250 gains apply?

Accepted Answer

A)  When the taxpayer makes the election. 
B)  It applies only when non-corporate taxpayers sell depreciable real property at a gain. 
C)  It applies when §1245 recapture trumps §1250 recapture. 
D)  It applies only when real property purchased before 1986 is sold at a gain. 
E)  None of these. 
A)  When the taxpayer makes the election. 
B)  It applies only when non-corporate taxpayers sell depreciable real property at a gain. 
C)  It applies when §1245 recapture trumps §1250 recapture. 
D)  It applies only when real property purchased before 1986 is sold at a gain. 
E)  None of these.

Question 17

Which of the following is not true regarding an asset's adjusted basis?

Accepted Answer

A)  Tax adjusted basis is usually greater than book adjusted basis. 
B)  Tax adjusted basis is usually less than book adjusted basis. 
C)  Adjusted basis is cost basis less cost recovery deductions. 
D)  Tax adjusted basis may change over time. 
A)  Tax adjusted basis is usually greater than book adjusted basis. 
B)  Tax adjusted basis is usually less than book adjusted basis. 
C)  Adjusted basis is cost basis less cost recovery deductions. 
D)  Tax adjusted basis may change over time.

Question 18

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: $$\begin{array} { | l | r | r | r | } 
\hline { \text { Asset } } & \text { Original Cost } & \begin{array} { c } 
\text { Accumulated } \
\text { Depreciation }
\end{array} & \text { Gain/Loss } \
\hline \text { Machinery } & \$ 12,000 & \$ 7,000 & \$ 6,000 \
\hline \text { Furniture } & 10,000 & 2,000 & 3,000 \
\hline \text { Building } & 90,000 & 20,000 & ( 5,000 ) \
\hline
\end{array}$$ Assuming Andrew's marginal ordinary income tax rate is 30 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 inco

Question 19

Brandon, an individual, began business four years ago and has never sold a §1231 asset. Brandon owned each of the assets for several years. In the current year, Brandon sold the following business assets: $$\begin{array} { | l | r | r | r | } 
\hline { \text { Asset } } & \text { Original Cost } & \begin{array} { r } 
\text { Accumulated } \
\text { Depreciation }
\end{array} & \text { Gain/Loss } \
\hline \text { Machinery } & \$ 30,000 & \$ 7,000 & \$ 10,000 \
\hline \text { Computers } & 10,000 & 6,000 & ( 2,000 ) \
\hline \text { Building } & 90,000 & 20,000 & ( 2,000 ) \
\hline
\end{array}$$ Assuming Brandon's marginal ordinary income tax rate is 35 percent, what effect do the gains and losses have on Brandon's tax liability?

Accepted Answer

A)  $7,000 ordinary income, $1,000 §1231 loss and $2,100 tax liability. 
B)  $6,000 ordinary income and $2,100 tax liability. 
C)  $7,000 §1231 gain and $2,450 tax liability. 
D)  $7,000 §1231 gain and $1,050 tax liability. 
E)  None of these. 
A)  $7,000 ordinary income, $1,000 §1231 loss and $2,100 tax liability. 
B)  $6,000 ordinary income and $2,100 tax liability. 
C)  $7,000 §1231 gain and $2,450 tax liability. 
D)  $7,000 §1231 gain and $1,050 tax liability. 
E)  None of these.

Question 20

Which of the following sections recaptures or recharacterizes only corporate taxpayer's gains?

Accepted Answer

A)  §291. 
B)  §1239. 
C)  §1245. 
D)  Unrecaptured §1250 gains. 
E)  None of these. 
A)  §291. 
B)  §1239. 
C)  §1245. 
D)  Unrecaptured §1250 gains. 
E)  None of these.

The gain or loss realized is always recognized for tax purposes.

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

Which of the following is not usually included in an asset's tax basis?

The general rule regarding the exchanged basis in a like-kind exchange is:

Depreciation recapture changes both the amount and character of a gain.

Bateman Corporation sold an office building that it used in its business for $800,000. Bateman bought the building ten years ago for $600,000 and has claimed $200,000 of depreciation expense. What is the amount and character of Bateman's gain or loss?

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

For an installment sale, the gross profit percentage is the gain recognized divided by the gain realized.

Foreaker LLC sold a piece of land that it uses in its business for $52,000. Foreaker bought the land two years ago for $42,500. What is the amount and character of Foreaker's gain?

Which of the following is true regarding the §1231 look-back rule?

Buzz Corporation sold an office building that it used in its business for $500,000. Buzz bought the building ten years ago for $650,000 and has claimed $200,000 of depreciation expense. What is the amount and character of Buzz's gain or loss?

Boot is not like-kind property involved in a like-kind exchange.

When does unrecaptured §1250 gains apply?

Which of the following is not true regarding an asset's adjusted basis?

Which of the following sections recaptures or recharacterizes only corporate taxpayer's gains?

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

Compensation

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

Filters

Exam 10: Property Dispositions

The gain or loss realized is always recognized for tax purposes.

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

Which of the following is not usually included in an asset's tax basis?

The general rule regarding the exchanged basis in a like-kind exchange is:

Depreciation recapture changes both the amount and character of a gain.

Bateman Corporation sold an office building that it used in its business for $800,000. Bateman bought the building ten years ago for $600,000 and has claimed $200,000 of depreciation expense. What is the amount and character of Bateman's gain or loss?

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

For an installment sale, the gross profit percentage is the gain recognized divided by the gain realized.

Foreaker LLC sold a piece of land that it uses in its business for $52,000. Foreaker bought the land two years ago for $42,500. What is the amount and character of Foreaker's gain?

Which of the following is true regarding the §1231 look-back rule?

Buzz Corporation sold an office building that it used in its business for $500,000. Buzz bought the building ten years ago for $650,000 and has claimed $200,000 of depreciation expense. What is the amount and character of Buzz's gain or loss?

Boot is not like-kind property involved in a like-kind exchange.

When does unrecaptured §1250 gains apply?

Which of the following is not true regarding an asset's adjusted basis?

Which of the following sections recaptures or recharacterizes only corporate taxpayer's gains?

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

Compensation

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

Filters