Question 1

Losses on sales between related parties are realized but not recognized.

Accepted Answer

A) True 
 B)False

Question 2

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?

Accepted Answer

The answer of Bull Run sold a computer for $1,200...

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

§1250 recaptures the excess of accelerated depreciation over straight line depreciation on real property placed in service between 1981 and 1986 as ordinary income.

Accepted Answer

A) True 
 B)False

Question 5

The adjusted basis is the cost basis less cost recovery deductions.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Unrecaptured §1250 gains apply only to individuals.

Accepted Answer

A) True 
 B)False

Question 8

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 9

Andrea sold a piece of machinery she used in her business for 9 months. The amount realized was $50,000 and the adjusted basis was $55,000. What is Andrea's gain or loss realized and what is the character of the gain or loss?

Accepted Answer

$5,000 ord

Question 10

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?

Accepted Answer

$20,000 of

Question 11

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

Question 12

Bozeman sold equipment that it uses in its business for $80,000. Bozeman bought the equipment two years ago for $75,000 and has claimed $20,000 of depreciation expense. What is the amount and character of Bozeman's gain or loss?

Accepted Answer

A)  $25,000 §1231 gain. 
B)  $20,000 ordinary gain, and $5,000 §1231 gain. 
C)  $5,000 ordinary gain, and $20,000 §1231 gain. 
D)  $25,000 capital gain. 
E)  None of these. 
A)  $25,000 §1231 gain. 
B)  $20,000 ordinary gain, and $5,000 §1231 gain. 
C)  $5,000 ordinary gain, and $20,000 §1231 gain. 
D)  $25,000 capital gain. 
E)  None of these.

Question 13

Koch traded machine 1 for machine 2. Koch originally purchased machine 1 for $75,000 and machine 1's adjusted basis was $40,000 at the time of the exchange. Machine 2's seller purchased it for $65,000 and machine 2's adjusted basis was $55,000 at the time of the exchange. What is Koch's adjusted basis in machine 2 after the exchange?

Accepted Answer

A)  $40,000. 
B)  $50,000. 
C)  $55,000. 
D)  $75,000. 
E)  None of these. 
A)  $40,000. 
B)  $50,000. 
C)  $55,000. 
D)  $75,000. 
E)  None of these.

Question 14

The sale of land held for investment 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.

Question 15

Why does §1250 recapture generally no longer apply?

Accepted Answer

A)  Congress repealed the code section. 
B)  The Tax Reform Act of 1986 changed the depreciation of real property to the straight-line method. 
C)  §1245 recapture trumps §1250 recapture. 
D)  Because unrecaptured §1250 gains now apply to all taxpayers instead. 
E)  None of these. 
A)  Congress repealed the code section. 
B)  The Tax Reform Act of 1986 changed the depreciation of real property to the straight-line method. 
C)  §1245 recapture trumps §1250 recapture. 
D)  Because unrecaptured §1250 gains now apply to all taxpayers instead. 
E)  None of these.

Question 16

An installment sale is any sale where at least a portion of the sales proceeds is recognized in a subsequent taxable year.

Accepted Answer

A) True 
 B)False

Question 17

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 18

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

Question 19

Assets held for investment and personal use assets are examples of capital assets.

Accepted Answer

A) True 
 B)False

Question 20

Sarah sold 1,000 shares of stock to her brother, David, for $18,000 last year. 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?

Accepted Answer

$3,000 long-term capital loss

Exam 10: Property Dispositions

Losses on sales between related parties are realized but not recognized.

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.

§1250 recaptures the excess of accelerated depreciation over straight line depreciation on real property placed in service between 1981 and 1986 as ordinary income.

The adjusted basis is the cost basis less cost recovery deductions.

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

Unrecaptured §1250 gains apply only to individuals.

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.

Andrea sold a piece of machinery she used in her business for 9 months. The amount realized was $50,000 and the adjusted basis was $55,000. What is Andrea's gain or loss realized and what is the character of the gain or loss?

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?

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?

Bozeman sold equipment that it uses in its business for $80,000. Bozeman bought the equipment two years ago for $75,000 and has claimed $20,000 of depreciation expense. What is the amount and character of Bozeman's gain or loss?

The sale of land held for investment results in the following type of gain or loss?

Why does §1250 recapture generally no longer apply?

An installment sale is any sale where at least a portion of the sales proceeds is recognized in a subsequent taxable year.

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

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

Assets held for investment and personal use assets are examples of capital assets.

Sarah sold 1,000 shares of stock to her brother, David, for $18,000 last year. 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?

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

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