Exam 13: Property Transactions: Sec1231 and Recapture

Aamir has $25,000 of net Sec.1231 gains this year on business assets.In addition,he incurred $18,000 of loss on the sale of stock held six months.Aamir will include in his AGI

In 2017,Thomas,who has a marginal tax rate of 15%,sells land that is Sec.1231 property at a gain of $4,000.If he has no other 1231 transactions or capital asset transactions and has no nonrecaptured 1231 gain,Thomas will pay no tax on the $4,000 gain.

An unincorporated business sold two warehouses during the current year.The straight-line depreciation method was used for Building No.1 and the accelerated method (ACRS) was used for Building No.2.Information about those buildings is presented below. How much gain from these sales should be reported as Sec.1231 gain and ordinary income due to depreciation recapture?

Trena LLC,a tax partnership owned equally by Trent and Nina,sells a building it had placed in service five years ago.Sec.291 will require that part of the gain (up to 20% of accumulated depreciation) be treated as ordinary gain,with the balance treated as Sec.1231 gain.

If no gain is recognized in a nontaxable like-kind exchange involving Sec.1245 or Sec.1250 property,the recapture potential carries over to the replacement property.

If a taxpayer has gains on Sec.1231 assets,Secs.1245 and 1250 must be applied first to determine any amounts recaptured as ordinary income,and any excess gain may then be netted with Sec.1231 losses for possible long-term capital gain treatment.

A taxpayer acquired new machinery costing $50,000 three years ago.The taxpayer had elected Sec.179 expensing to deduct the full cost in the year of acquisition.The taxpayer sells the machinery this year and realizes a $32,000 gain.Sec.1245 will not require any ordinary income recapture on the sale of this asset due to the Sec.179 expensing.

Marta purchased residential rental property for $600,000 on January 1,1985.Total ACRS deductions for 1985 through the date of sale amounted to $600,000.If the straight-line method of depreciation had been used,depreciation would have been $600,000.The property is sold for $750,000 on January 1 of the current year.The amount and character of the gain is

Eric purchased a building in 2006 that he uses in his business.Eric uses the straight-line method for the building.Eric's original cost for the building is $420,000 and cost-recovery deductions are $120,000.Eric is in the top tax bracket and has never sold any other business assets.If the building is sold for $560,000,the tax results are

On June 1,2014,Buffalo Corporation purchased and placed in service 7-year MACRS tangible property costing $100,000.On November 10,2017,Buffalo sold the property for $102,000 after having taken MACRS $47,525 in depreciation deductions.What is the amount and character of Buffalo's gain?

The sale of inventory results in ordinary gain or loss.

Which of the following assets is 1231 property?

The following are gains and losses recognized in 2017 on Ann's business assets that were held for more than one year.The assets qualify as Sec.1231 property. A summary of Ann's net Sec.1231 gains and losses for the previous five-year period is as follows: Describe the specific tax treatment of each of the current year transactions.

For noncorporate taxpayers,depreciation recapture is not required on real property placed in service after 1986.

Dinah owned land with a FMV of $130,000 (adjusted basis $120,000) which is investment property (a capital asset).Dinah owned a second tract of land,a 1231 asset,with a FMV of $46,000 (adjusted basis $50,000).Both tracts were acquired in 2001 and condemned by the state this year.The state paid an amount equal to FMV.If there are no other transactions involving capital assets or 1231 assets,Dinah must report on her current year return