Exam 8: Property Dispositions

Oslego Company, a calendar year taxpayer, sold land with a $400,000 tax basis for $635,000 in March 2013. The purchaser paid $50,000 cash at closing and gave Oslego an interest-bearing note for the $585,000 remaining price. In September, Oslego received $50,450 cash from the purchaser consisting of a $29,250 principal payment and a $21,200 interest payment. Assuming that Oslego does not elect out of the installment sale method, compute the company's 2013 gain recognized on sale and its tax basis in the note receivable on December 31.

Tullia Inc. recognized $500,000 ordinary income, $22,600 net Section 1231 gain, and $6,000 net capital loss this year. Tullia's taxable income is $522,600.

Irby Inc. was incorporated in 2005 and adopted a calendar year. Here is a schedule of Irby's net Section 1231 gains and (losses) reported on its tax returns through 2010. In 2011, Irby recognized a $14,750 gain on the sale of business land. How is this gain characterized on Irby's tax return?

JG Inc. recognized $690,000 ordinary income, $48,000 net Section 1231 gain, and $77,000 net capital loss this year. JG's taxable income is $690,000.

Gupta Company made the following sales of capital assets this year. What is the effect of the three sales on Gupta's taxable income?

Fantino Inc. was incorporated in 2008 and adopted a calendar year for tax purposes. Here is a schedule of Fantino's taxable income for 2008 and 2009. In 2010, Fantino generated $297,300 ordinary income and recognized a $14,000 net capital loss. Which of the following statements is true?

Skeen Company paid $90,000 for tangible personalty three years ago and elected to expense and deduct the cost under Section 179. This year, Skeen sold the personalty for $52,700. Accumulated book depreciation through date of sale was $31,000. What is the effect of the sale on Skeen's book income and taxable income?

Winslow Company sold investment land to an unrelated purchaser. The purchaser paid $250,000 cash, assumed Winslow's $600,000 mortgage on the land, and gave Winslow its $580,000 ten-year, interest-bearing note. Compute Winslow's amount realized on sale.

The sale of business inventory always generates ordinary income or loss.

A taxpayer cannot compute its net Section 1231 gain or loss for a taxable year until the year closes.