Exam 8: Capital Gains and Losses

The depreciation recapture provisions are designed to prevent taxpayers from converting capital gains into ordinary income.

Rod had the following personal casualty in 2016: ​ ​ ​ ​ Calculate the amount and nature of Rod's gain or loss as a result of this casualty.

Accounts receivable are capital assets.

After 4 years of life in the slow lane, Doug decided to give up his goat ranch and move back to the big city. He sold the goat milking machine for $1,000. The machine originally cost $1,200 and had $820 of accumulated depreciation at the time of sale. ​ a.What is the total gain or loss on the sale of the goat milking machine? b.Is the gain or loss treated as capital or ordinary? Explain.

Net short-term capital gains may be offset by net long-term capital losses.

There is no limit on the amount of capital losses that an individual may deduct against ordinary income.

The owner of M&N Milling exchanged a milling machine used in his business for a new one. M&N Milling's basis in the machine was $20,000 and the owner still owes $6,000 related to the purchase of the machine. The other party to the exchange, M. Grinding, assumed the liability along with the machine and transferred a newer and smaller machine worth $30,000 to M&N Milling. a. Calculate M&N Milling's 1. Realized gain on the exchange. $__________ 2. Recognized gain on the exchange. $__________ b. Calculate the adjusted basis of the newer machine. $__________ a.Calculate M&N Milling's

Which one of the following qualifies as a like-kind exchange?

Terry has a casualty gain of $1,000 and a casualty loss of $5,500, before the $100 floor and before the adjusted gross income limitation. The gain and loss were the result of two separate casualties occurring during the current year and both properties were personal-use assets. If Terry itemizes deductions on her current year return and has adjusted gross income of $25,000, what is Terry's gain or net itemized deduction as a result of these casualties?