Question 1

A net §1231 gain becomes ordinary while a net §1231 loss becomes long-term capital gain.

Accepted Answer

A) True 
 B)False

Question 2

Depreciation recapture changes both the amount and character of a gain.
Depreciation recapture changes the character of the gain, not the amount.

Accepted Answer

A) True 
 B)False

Question 3

For a like-kind exchange, realized gain is deferred if the exchange is solely for like-kind property.

Accepted Answer

A) True 
 B)False

Question 4

The sale of computer equipment used in a trade or business for 9 months 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

The gain or loss realized on the sale of an asset is the amount realized less the adjusted basis.

Accepted Answer

A) True 
 B)False

Question 6

Realized gains are recognized unless there is specific exception.

Accepted Answer

A) True 
 B)False

Question 7

The sale of machinery for more than the original cost basis (before depreciation), used in a trade or business, and held for more than one year results in the following types of gain or loss?

Accepted Answer

A)  Capital and Ordinary. 
B)  Ordinary only. 
C)  Capital and §1231. 
D) §1245 and §1231. 
E) None of these 
A)  Capital and Ordinary. 
B)  Ordinary only. 
C)  Capital and §1231. 
D) §1245 and §1231. 
E) None of these

Question 8

Brandon, an individual, began business four years ago and has never sold a §1231 asset. Brandon owned each of the assets for several years. In the current year, Brandon sold the following business assets:
Assuming Brandon's marginal ordinary income tax rate is 35 percent, what effect do the gains and losses have on Brandon's tax liability?
$$\begin{array} { | l | r | r | r | } 
\hline \text { Asset } & \begin{array} { r } 
\text { Origina } \
\text { Cost }
\end{array} & \begin{array} { r } 
\text { Accumulated } \
\text { Depreciation }
\end{array} & \text { GainLoss } \
\hline \text { Machinery } & \$ 30,000 & \$ 7,000 & \$ 10,000 \
\hline \text { Computers } & 10,000 & 6,000 & ( 2,000 ) \
\hline \text { Building } & 90,000 & 20,000 & ( 2,000 ) \
\hline
\end{array}$$

Accepted Answer

A)  $7,000 ordinary income, $1,000 §1231 loss and $2,100 tax liability. 
B)  $6,000 ordinary income and $2,100 tax liability. 
C)  $7,000 §1231 gain and $2,450 tax liability. 
D) $7,000 §1231 gain and $1,050 tax liability. 
E) None of these 
A)  $7,000 ordinary income, $1,000 §1231 loss and $2,100 tax liability. 
B)  $6,000 ordinary income and $2,100 tax liability. 
C)  $7,000 §1231 gain and $2,450 tax liability. 
D) $7,000 §1231 gain and $1,050 tax liability. 
E) None of these

Question 9

Which one of the following is not a requirement of a deferred like-kind exchange?

Accepted Answer

A)  The like-kind property to be received must be identified within 45 days. 
B)  The exchange must be completed within the taxable year. 
C)  The like-kind property must be received within 180 days. 
D) A third party intermediary is often used to facilitate the exchange. 
E) All of these 
A)  The like-kind property to be received must be identified within 45 days. 
B)  The exchange must be completed within the taxable year. 
C)  The like-kind property must be received within 180 days. 
D) A third party intermediary is often used to facilitate the exchange. 
E) All of these

Question 10

Reid had a business building destroyed in a fire. The old building was purchased for $375,000 and $60,000 of depreciation deductions had been taken. Although the old building had a fair market value of $425,000 at the time of the fire, his insurance proceeds were limited to $400,000. Reid found qualified replacement property which he acquired six months later for $390,000. What is the amount of Reid's realized gain and recognized gain?

Accepted Answer

$85,000 realized gain and $10,000 recogn

Question 11

Sunshine LLC sold furniture for $75,000. Sunshine bought the furniture for $90,000 several years ago and has claimed $25,000 of depreciation expense on the machine. What is the amount and character of Sunshine's gain or loss?

Accepted Answer

$10,000 ordinary gain.
Explana

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Foreaker LLC sold a piece of land that it uses in its business for $52,000. Foreaker bought the land two years ago for $42,500. What is the amount and character of Foreaker's gain?

Accepted Answer

A)  $9,500 §1221. 
B)  $9,500 §1231. 
C)  $9,500 §1245. 
D) $9,500 §1250. 
E) None of these 
A)  $9,500 §1221. 
B)  $9,500 §1231. 
C)  $9,500 §1245. 
D) $9,500 §1250. 
E) None of these

Question 14

Which of the following is not an involuntary conversion?

Accepted Answer

A)  Destruction caused by a hurricane. 
B)  Imminent domain. 
C)  A foreclosure. 
D) Fire damage. 
E) All of these are involuntary conversions. 
A)  Destruction caused by a hurricane. 
B)  Imminent domain. 
C)  A foreclosure. 
D) Fire damage. 
E) All of these are involuntary conversions.

Question 15

Which of the following is not a §1245 asset if held for more than one year?

Accepted Answer

A)  Machinery. 
B)  Automobile. 
C)  Computer. 
D) Land. 
E) None of these 
A)  Machinery. 
B)  Automobile. 
C)  Computer. 
D) Land. 
E) None of these

Question 16

Which of the following may qualify as an installment sale?

Accepted Answer

A)  Sale of inventory at a gain. 
B)  Sale of securities. 
C)  Sale of asset used in a business at a gain. 
D) Land sold at a loss. 
E) All of these qualify for installment sale treatment. 
A)  Sale of inventory at a gain. 
B)  Sale of securities. 
C)  Sale of asset used in a business at a gain. 
D) Land sold at a loss. 
E) All of these qualify for installment sale treatment.

Question 17

Arlington LLC traded machinery used in its business to a machinery dealer for some new machinery. Arlington originally purchased the machinery for $60,000 and it had an adjusted basis of $28,000 at the time of the exchange. The new machinery had a fair market value of $35,000. Arlington also received $2,000 of office equipment in the transaction. What is Arlington's gain or loss recognized on the exchange?

Accepted Answer

A)  $0. 
B)  $2,000. 
C)  $7,000. 
D) $9,000. 
E) None of these 
A)  $0. 
B)  $2,000. 
C)  $7,000. 
D) $9,000. 
E) None of these

Question 18

A simultaneous exchange must take place for a transaction to qualify as a like-kind exchange.

Accepted Answer

A) True 
 B)False

Question 19

Redoubt LLC traded machinery used in its business to a machinery dealer for some new machinery. Redoubt originally purchased the machinery for $80,000 and it had an adjusted basis of $53,000 at the time of the exchange. The new machinery had a fair market value of $62,000. Redoubt also received $7,000 of computer equipment in the transaction. What is Redoubt's gain or loss recognized on the exchange?

Accepted Answer

$7,000 gain.
Explanation: The gain recog

Question 20

Brad sold a rental house that he owned for $250,000. Brad bought the rental house five years ago for $225,000 and has claimed $50,000 of depreciation expense. What is the amount and character of Brad's gain or loss?

Accepted Answer

A)  $25,000 ordinary and $50,000 unrecaptured §1250 gain. 
B)  $25,000 §1231 gain and $50,000 unrecaptured §1250 gain. 
C)  $75,000 ordinary gain. 
D) $75,000 capital gain. 
E) None of these 
A)  $25,000 ordinary and $50,000 unrecaptured §1250 gain. 
B)  $25,000 §1231 gain and $50,000 unrecaptured §1250 gain. 
C)  $75,000 ordinary gain. 
D) $75,000 capital gain. 
E) None of these

A net §1231 gain becomes ordinary while a net §1231 loss becomes long-term capital gain.

Depreciation recapture changes both the amount and character of a gain. Depreciation recapture changes the character of the gain, not the amount.

For a like-kind exchange, realized gain is deferred if the exchange is solely for like-kind property.

The sale of computer equipment used in a trade or business for 9 months results in the following type of gain or loss?

The gain or loss realized on the sale of an asset is the amount realized less the adjusted basis.

Realized gains are recognized unless there is specific exception.

The sale of machinery for more than the original cost basis (before depreciation), used in a trade or business, and held for more than one year results in the following types of gain or loss?

Which one of the following is not a requirement of a deferred like-kind exchange?

Sunshine LLC sold furniture for $75,000. Sunshine bought the furniture for $90,000 several years ago and has claimed $25,000 of depreciation expense on the machine. What is the amount and character of Sunshine's gain or loss?

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

Foreaker LLC sold a piece of land that it uses in its business for $52,000. Foreaker bought the land two years ago for $42,500. What is the amount and character of Foreaker's gain?

Which of the following is not an involuntary conversion?

Which of the following is not a §1245 asset if held for more than one year?

Which of the following may qualify as an installment sale?

A simultaneous exchange must take place for a transaction to qualify as a like-kind exchange.

Brad sold a rental house that he owned for $250,000. Brad bought the rental house five years ago for $225,000 and has claimed $50,000 of depreciation expense. What is the amount and character of Brad's gain or loss?

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

A net §1231 gain becomes ordinary while a net §1231 loss becomes long-term capital gain.

Depreciation recapture changes both the amount and character of a gain. Depreciation recapture changes the character of the gain, not the amount.

For a like-kind exchange, realized gain is deferred if the exchange is solely for like-kind property.

The sale of computer equipment used in a trade or business for 9 months results in the following type of gain or loss?

The gain or loss realized on the sale of an asset is the amount realized less the adjusted basis.

Realized gains are recognized unless there is specific exception.

The sale of machinery for more than the original cost basis (before depreciation), used in a trade or business, and held for more than one year results in the following types of gain or loss?

Which one of the following is not a requirement of a deferred like-kind exchange?

Sunshine LLC sold furniture for $75,000. Sunshine bought the furniture for $90,000 several years ago and has claimed $25,000 of depreciation expense on the machine. What is the amount and character of Sunshine's gain or loss?

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

Foreaker LLC sold a piece of land that it uses in its business for $52,000. Foreaker bought the land two years ago for $42,500. What is the amount and character of Foreaker's gain?

Which of the following is not an involuntary conversion?

Which of the following is not a §1245 asset if held for more than one year?

Which of the following may qualify as an installment sale?

A simultaneous exchange must take place for a transaction to qualify as a like-kind exchange.

Brad sold a rental house that he owned for $250,000. Brad bought the rental house five years ago for $225,000 and has claimed $50,000 of depreciation expense. What is the amount and character of Brad's gain or loss?

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