Question 1

Residential real property is not like-kind with non-residential real property.

Accepted Answer

A) True 
 B)False  False

Question 2

Suzanne, an individual, began business four years ago and has never sold a §1231 asset. Suzanne owned each of the assets for several years. In the current year, Suzanne sold the following business assets:
Assuming Suzanne's marginal ordinary income tax rate is 35 percent, what is the character of the gains and losses and what affect do they have on Suzanne's tax liability?
 $$\begin{array} { | l | r | r | r | } 
\hline \text { Asset } & \begin{array} { r } 
\text { Original } \
\text { Cost }
\end{array} & \begin{array} { r } 
\text { Accumulated } \
\text { Depreciation }
\end{array} & \text { Gain/Loss } \
\hline \text { Machinery } & \$ 12,000 & \$ 7,000 & \$ 6,000 \
\hline \text { Furniture } & 10,000 & 2,000 & ( 3,000 ) \
\hline \text { Building } & 90,000 & 20,000 & 15,000 \
\hline
\end{array}$$

Accepted Answer

$6,000 ordinary gain, $12,000 unrecaptured §1250 gain, $5,100 in tax liability.
Explanation: The depreciation recapture of $6,000 becomes ordinary income. The $3,000 §1231 loss is offset against the unrecaptured §1250 gain of $15,000. The $6,000 gain is taxed at 35 percent and the $12,000 gain is taxed at 25 percent, which results in $5,100 of tax.

Question 3

Manassas purchased a computer several years ago for $2,200. On November 10th of the current year, the computer was worth $800. If $1,000 of depreciation deductions had been taken, what is Manassas' tax adjusted basis for the computer?

Accepted Answer

$1,200.
Explanation: The adjusted basis is the cost basis less cost recovery deductions. ($2,200 - $1,000).

Question 4

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 5

Leesburg sold a machine for $2,200 on November 10th of the current year. The machine was purchased for $2,600. Leesburg had taken $1,200 of depreciation deductions on the machine through the date of the sale. What is Leesburg's gain or loss realized on the machine?

Accepted Answer

A)  $800 gain. 
B)  $1,000 gain. 
C)  $1,200 loss. 
D) $1,400 loss. 
E) None of these 
A)  $800 gain. 
B)  $1,000 gain. 
C)  $1,200 loss. 
D) $1,400 loss. 
E) None of these

Question 6

Alexandra sold equipment that she uses in her business for $100,000. Alexandra bought the equipment two years ago for $90,000 and has claimed $25,000 of depreciation expense. What is the amount and character of Alexandra's gain or loss?

Accepted Answer

$25,000 ordinary gain, and $10,000 §1231

Question 7

An asset's tax adjusted basis is usually greater than its book adjusted basis.
Because businesses generally use more highly accelerated depreciation methods for tax purposes than they do for book purposes, the tax-adjusted basis of a particular asset is likely to be lower than the book-adjusted basis.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is true regarding disallowed losses between related taxpayers?

Accepted Answer

A)  The tax laws essentially treat related parties as the same taxpayer. 
B)  The holding period carries over to the related person. 
C)  The related person always receives a carryover basis. 
D) The seller's realized loss is deferred until the buyer sells the assets. 
E) None of these 
A)  The tax laws essentially treat related parties as the same taxpayer. 
B)  The holding period carries over to the related person. 
C)  The related person always receives a carryover basis. 
D) The seller's realized loss is deferred until the buyer sells the assets. 
E) None of these

Question 9

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 10

Which of the following is not used in the calculation of the amount realized?

Accepted Answer

A)  Cash. 
B)  Adjusted basis. 
C)  Fair market value of other property received. 
D) Buyer's assumption of liabilities. 
E) All of these are used. 
A)  Cash. 
B)  Adjusted basis. 
C)  Fair market value of other property received. 
D) Buyer's assumption of liabilities. 
E) All of these are used.

Question 11

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 12

Unrecaptured §1250 gains apply only to individuals.

Accepted Answer

A) True 
 B)False

Question 13

Ashburn reported a $105,000 net §1231 gain in year 6. Assuming Ashburn reported $60,000 of nonrecaptured §1231 losses during years 1-5, what amount of Ashburn's net §1231 gain for year 6, if any, is treated as ordinary income?

Accepted Answer

A)  $0. 
B)  $45,000. 
C)  $60,000. 
D) $105,000. 
E) None of these 
A)  $0. 
B)  $45,000. 
C)  $60,000. 
D) $105,000. 
E) None of these

Question 14

What is the primary purpose of a third-party intermediary in a deferred like-kind exchange?

Accepted Answer

A)  To facilitate finding replacement property. 
B)  To help acquire the replacement property. 
C)  To prevent the seller from receiving cash (boot) that will taint the transaction. 
D) To certify the taxpayer's Form 8824. 
E) All of these 
A)  To facilitate finding replacement property. 
B)  To help acquire the replacement property. 
C)  To prevent the seller from receiving cash (boot) that will taint the transaction. 
D) To certify the taxpayer's Form 8824. 
E) All of these

Question 15

Kristi had a business building destroyed in an earthquake. The old building was purchased for $250,000 and $80,000 of depreciation deductions had been taken. Her insurance proceeds were $550,000. Although the replacement property was much larger and nicer than her old building, Kristi's new property qualified as replacement property. She acquired the new property 13 months after the earthquake for $620,000. What is the amount of Kristi's realized gain and recognized gain and the basis in her new property?

Accepted Answer

$380,000 realized gain, $0 recognized ga

Question 16

Which of the following sections does not recapture or recharacterize a taxpayer's gain?

Accepted Answer

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

Question 17

The amount realized is the sale proceeds less the adjusted basis.

Accepted Answer

A) True 
 B)False

Question 18

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 short-term capital loss if sold f

Question 19

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 ordinary and $40,000 §1231 gain.

Question 20

§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

Residential real property is not like-kind with non-residential real property.

Manassas purchased a computer several years ago for $2,200. On November 10^th of the current year, the computer was worth $800. If $1,000 of depreciation deductions had been taken, what is Manassas' tax adjusted basis for the computer?

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

Leesburg sold a machine for $2,200 on November 10^th of the current year. The machine was purchased for $2,600. Leesburg had taken $1,200 of depreciation deductions on the machine through the date of the sale. What is Leesburg's gain or loss realized on the machine?

Alexandra sold equipment that she uses in her business for $100,000. Alexandra bought the equipment two years ago for $90,000 and has claimed $25,000 of depreciation expense. What is the amount and character of Alexandra's gain or loss?

Which of the following is true regarding disallowed losses between related taxpayers?

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?

Which of the following is not used in the calculation of the amount realized?

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

Unrecaptured §1250 gains apply only to individuals.

Ashburn reported a $105,000 net §1231 gain in year 6. Assuming Ashburn reported $60,000 of nonrecaptured §1231 losses during years 1-5, what amount of Ashburn's net §1231 gain for year 6, if any, is treated as ordinary income?

What is the primary purpose of a third-party intermediary in a deferred like-kind exchange?

Which of the following sections does not recapture or recharacterize a taxpayer's gain?

The amount realized is the sale proceeds less the adjusted basis.

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?

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?

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

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

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

Filters

Exam 3: Property Dispositions

Residential real property is not like-kind with non-residential real property.

Manassas purchased a computer several years ago for $2,200. On November 10th of the current year, the computer was worth $800. If $1,000 of depreciation deductions had been taken, what is Manassas' tax adjusted basis for the computer?

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

Leesburg sold a machine for $2,200 on November 10th of the current year. The machine was purchased for $2,600. Leesburg had taken $1,200 of depreciation deductions on the machine through the date of the sale. What is Leesburg's gain or loss realized on the machine?

Alexandra sold equipment that she uses in her business for $100,000. Alexandra bought the equipment two years ago for $90,000 and has claimed $25,000 of depreciation expense. What is the amount and character of Alexandra's gain or loss?

Which of the following is true regarding disallowed losses between related taxpayers?

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?

Which of the following is not used in the calculation of the amount realized?

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

Unrecaptured §1250 gains apply only to individuals.

Ashburn reported a $105,000 net §1231 gain in year 6. Assuming Ashburn reported $60,000 of nonrecaptured §1231 losses during years 1-5, what amount of Ashburn's net §1231 gain for year 6, if any, is treated as ordinary income?

What is the primary purpose of a third-party intermediary in a deferred like-kind exchange?

Which of the following sections does not recapture or recharacterize a taxpayer's gain?

The amount realized is the sale proceeds less the adjusted basis.

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?

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?

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

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

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

Filters

Manassas purchased a computer several years ago for $2,200. On November 10^th of the current year, the computer was worth $800. If $1,000 of depreciation deductions had been taken, what is Manassas' tax adjusted basis for the computer?

Leesburg sold a machine for $2,200 on November 10^th of the current year. The machine was purchased for $2,600. Leesburg had taken $1,200 of depreciation deductions on the machine through the date of the sale. What is Leesburg's gain or loss realized on the machine?