Question 1

Only accelerated depreciation is recaptured for §1245 assets.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is not true regarding §1239?

Accepted Answer

A)  It only applies to related taxpayers. 
B)  It only applies to gains on sales of depreciable property. 
C)  It only applies to gains on sales of non-residential real property. 
D)  It does not apply to losses. 
E)  None of these. 
A)  It only applies to related taxpayers. 
B)  It only applies to gains on sales of depreciable property. 
C)  It only applies to gains on sales of non-residential real property. 
D)  It does not apply to losses. 
E)  None of these.

Question 3

Alpha sold machinery, which it used in its business, to Beta, a related entity, for $40,000. Beta used the machinery in its business. Alpha bought the equipment a few years ago for $50,000 and has claimed $30,000 of depreciation expense. What is the amount and character of Alpha's gain?

Accepted Answer

A)  $20,000 ordinary income under §1239. 
B)  $10,000 ordinary gain and $10,000 §1231 gain. 
C)  $20,000 ordinary gain. 
D)  $20,000 capital gain. 
E)  None of these. 
A)  $20,000 ordinary income under §1239. 
B)  $10,000 ordinary gain and $10,000 §1231 gain. 
C)  $20,000 ordinary gain. 
D)  $20,000 capital gain. 
E)  None of these.

Question 4

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 5

Taxpayers can recognize a taxable gain even though an asset's real economic value has declined.

Accepted Answer

A) True 
 B)False

Question 6

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 adjus

Question 7

Sadie sold 10 shares of stock to her brother, George, for $500 six months ago. Sadie had purchased the stock for $600 two years earlier. If George sells the stock for $700 six months later, what is the amount and character of his recognized gain or loss in the current year?

Accepted Answer

A)  $0. 
B)  $100 short-term capital gain. 
C)  $100 long-term capital gain. 
D)  $200 short-term capital gain. 
E)  None of these. 
A)  $0. 
B)  $100 short-term capital gain. 
C)  $100 long-term capital gain. 
D)  $200 short-term capital gain. 
E)  None of these.

Question 8

Losses on sales between related parties are realized but not recognized.

Accepted Answer

A) True 
 B)False

Question 9

Gainesville LLC sold the following business assets during the current year: (1) machinery, $20,000 cost basis, $4,000 depreciation, proceeds $22,000; (2) automobile, $15,000 cost basis, $12,000 depreciation, proceeds $7,000; (3) equipment, $15,000 cost basis, $10,000 depreciation, proceeds $4,000; (4) computer equipment, $35,000 cost basis, $16,000 depreciation, proceeds $15,000; (5) Winchester had unrecaptured §1231 losses of $5,000 in the prior 5 years. What is the amount and character of Winchester's gains and losses before the 1231 netting process?

Accepted Answer

$8,000 ordinary gain and $3,000 §1231 lo

Question 10

Which of the following is true regarding depreciation recapture?

Accepted Answer

A)  Changes the character of a loss. 
B)  Changes the character of a gain. 
C)  Changes the amount of a gain. 
D)  Only applies to ordinary assets. 
E)  None of these. 
A)  Changes the character of a loss. 
B)  Changes the character of a gain. 
C)  Changes the amount of a gain. 
D)  Only applies to ordinary assets. 
E)  None of these.

Question 11

Why does §1250 recapture generally no longer apply?

Accepted Answer

A)  Congress repealed the code section. 
B)  The Tax Reform Act of 1986 changed the depreciation of real property to the straight-line method. 
C)  §1245 recapture trumps §1250 recapture. 
D)  Because unrecaptured §1250 gains now apply to all taxpayers instead. 
E)  None of these. 
A)  Congress repealed the code section. 
B)  The Tax Reform Act of 1986 changed the depreciation of real property to the straight-line method. 
C)  §1245 recapture trumps §1250 recapture. 
D)  Because unrecaptured §1250 gains now apply to all taxpayers instead. 
E)  None of these.

Question 12

What is the character of land used in an active trade or business for two years?

Accepted Answer

A)  Capital. 
B)  Ordinary. 
C)  §1231. 
D)  Investment. 
E)  None of these. 
A)  Capital. 
B)  Ordinary. 
C)  §1231. 
D)  Investment. 
E)  None of these.

Question 13

Which one of the following is not considered boot in a like-kind exchange?

Accepted Answer

A)  Cash. 
B)  Other property. 
C)  Mortgage given. 
D)  Mortgage received. 
E)  All of these. 
A)  Cash. 
B)  Other property. 
C)  Mortgage given. 
D)  Mortgage received. 
E)  All of these.

Question 14

Luke sold land valued at $210,000. His original basis in the land was $180,000. For the land, Luke received $60,000 in cash in the current year and a note providing $150,000 in the subsequent year. What is Luke's recognized gain in the current and subsequent year, respectively?

Accepted Answer

$8,571 gain recognized in the current ye

Question 15

A loss realized for property destroyed in a hurricane is deferred under the involuntary conversion rules.

Accepted Answer

A) True 
 B)False

Question 16

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 17

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 18

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

Accepted Answer

A) True 
 B)False

Question 19

In the current year, Raven sold machinery with a fair market value of $200,000. The machinery's original basis was $190,000 and Raven's accumulated depreciation on the machinery was $40,000, so its adjusted basis to Raven was $150,000. Raven received $50,000 in the current year and a note paying Raven $75,000 a year for two years beginning in next year. What is the amount and character of the gain that Raven will recognize in the current year?

Accepted Answer

$42,500 gain recognized: $40,000 ordinar

Question 20

Unrecaptured §1250 gains apply only to individuals.

Accepted Answer

A) True 
 B)False

Only accelerated depreciation is recaptured for §1245 assets.

Which of the following is not true regarding §1239?

Alpha sold machinery, which it used in its business, to Beta, a related entity, for $40,000. Beta used the machinery in its business. Alpha bought the equipment a few years ago for $50,000 and has claimed $30,000 of depreciation expense. What is the amount and character of Alpha's gain?

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

Taxpayers can recognize a taxable gain even though an asset's real economic value has declined.

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?

Sadie sold 10 shares of stock to her brother, George, for $500 six months ago. Sadie had purchased the stock for $600 two years earlier. If George sells the stock for $700 six months later, what is the amount and character of his recognized gain or loss in the current year?

Losses on sales between related parties are realized but not recognized.

Which of the following is true regarding depreciation recapture?

Why does §1250 recapture generally no longer apply?

What is the character of land used in an active trade or business for two years?

Which one of the following is not considered boot in a like-kind exchange?

Luke sold land valued at $210,000. His original basis in the land was $180,000. For the land, Luke received $60,000 in cash in the current year and a note providing $150,000 in the subsequent year. What is Luke's recognized gain in the current and subsequent year, respectively?

A loss realized for property destroyed in a hurricane is deferred under the involuntary conversion rules.

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

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

Unrecaptured §1250 gains apply only to individuals.

An Introduction to Tax

Tax Compliance , the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Exemptions, and Filing Status

Gross Income and Exclusions

Individual for Agi Deductions

Individual From Agi Deductions

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Entities Overview

Corporate Formations and Operations

Corporate Nonliquidating and Liquidating Distributions

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S: Corporations

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Exam 11: Property Dispositions

Only accelerated depreciation is recaptured for §1245 assets.

Which of the following is not true regarding §1239?

Alpha sold machinery, which it used in its business, to Beta, a related entity, for $40,000. Beta used the machinery in its business. Alpha bought the equipment a few years ago for $50,000 and has claimed $30,000 of depreciation expense. What is the amount and character of Alpha's gain?

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

Taxpayers can recognize a taxable gain even though an asset's real economic value has declined.

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?

Sadie sold 10 shares of stock to her brother, George, for $500 six months ago. Sadie had purchased the stock for $600 two years earlier. If George sells the stock for $700 six months later, what is the amount and character of his recognized gain or loss in the current year?

Losses on sales between related parties are realized but not recognized.

Which of the following is true regarding depreciation recapture?

Why does §1250 recapture generally no longer apply?

What is the character of land used in an active trade or business for two years?

Which one of the following is not considered boot in a like-kind exchange?

Luke sold land valued at $210,000. His original basis in the land was $180,000. For the land, Luke received $60,000 in cash in the current year and a note providing $150,000 in the subsequent year. What is Luke's recognized gain in the current and subsequent year, respectively?

A loss realized for property destroyed in a hurricane is deferred under the involuntary conversion rules.

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

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

Unrecaptured §1250 gains apply only to individuals.

An Introduction to Tax

Tax Compliance , the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Exemptions, and Filing Status

Gross Income and Exclusions

Individual for Agi Deductions

Individual From Agi Deductions

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Entities Overview

Corporate Formations and Operations

Corporate Nonliquidating and Liquidating Distributions

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S: Corporations

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?