Question 1

Jessie sold a piece of land held for investment for $250,000. Jessie bought the land two years ago for $195,000. What is the amount and character of Jessie's gain?

Accepted Answer

Capital gain of $55,000.
Expla

Question 2

Explain whether the sale of a machine used in a trade or business that is sold at a loss generates an ordinary or capital loss?

Accepted Answer

The sale of a machine at a loss generate

Question 3

The adjusted basis is the cost basis less cost recovery deductions.

Accepted Answer

A) True 
 B)False

Question 4

Only accelerated depreciation is recaptured for §1245 assets.

Accepted Answer

A) True 
 B)False

Question 5

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 6

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 7

Which one of the following is not true regarding a like-kind exchange?

Accepted Answer

A) Loss on like-kind property is not recognized. 
B) Gains on boot given are deferred. 
C) Losses on boot given are not recognized. 
D) Securities can be like-kind with any other securities. 
E) All of these. 
A) Loss on like-kind property is not recognized. 
B) Gains on boot given are deferred. 
C) Losses on boot given are not recognized. 
D) Securities can be like-kind with any other securities. 
E) All of these.

Question 8

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 9

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

Accepted Answer

A) True 
 B)False

Question 10

Pelosi Corporation sold a parcel of land valued at $300,000. Its basis in the land was $250,000. For the land, Pelosi received $150,000 in cash in the current year and a note providing Pelosi with $150,000 in the subsequent year. What is Pelosi's recognized gain in the current and subsequent year, respectively?

Accepted Answer

A) $0, $50,000. 
B) $10,000, $40,000. 
C) $25,000, $25,000. 
D) $50,000, $0. 
E) None of these. 
A) $0, $50,000. 
B) $10,000, $40,000. 
C) $25,000, $25,000. 
D) $50,000, $0. 
E) None of these.

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

Ordinary gains and losses are obtained on the sale of investments.

Accepted Answer

A) True 
 B)False

Question 13

Winchester LLC sold the following business assets during the current year: (1) automobile, $30,000 cost basis, $12,000 depreciation, proceeds $20,000; (2) machinery, $25,000 cost basis, $20,000 depreciation, proceeds $10,000; (3) furniture, $15,000 cost basis, $10,000 depreciation, proceeds $4,000; (4) computer equipment, $25,000 cost basis, $6,000 depreciation, proceeds $10,000; (5) Winchester had unrecaptured §1231 losses of $3,000 in the prior 5 years. What is the amount and character of Winchester's gains and losses before the 1231 netting process?

Accepted Answer

A) $3,000 ordinary loss, $0 §1231 loss. 
B) $7,000 ordinary gain, $10,000 §1231 loss. 
C) $7,000 ordinary loss, $4,000 §1231 gain. 
D) $1,000 ordinary gain, $4,000 §1231 loss. 
E) None of these. 
A) $3,000 ordinary loss, $0 §1231 loss. 
B) $7,000 ordinary gain, $10,000 §1231 loss. 
C) $7,000 ordinary loss, $4,000 §1231 gain. 
D) $1,000 ordinary gain, $4,000 §1231 loss. 
E) None of these.

Question 14

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 15

Silver sold machinery to Gold, a related entity, which it used in its business for $55,000. Silver bought the equipment a few years ago for $50,000 and has claimed $15,000 of depreciation expense. What is the amount and character of Silver's gain?

Accepted Answer

$20,000 of ordinary income und

Question 16

§1239 recharacterizes 50 percent of the gain on sales to a related party as ordinary income.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is true regarding the §1231 look-back rule?

Accepted Answer

A) It only applies when a §1231 loss occurs. 
B) It only applies when a §1231 gain occurs. 
C) It only applies when a §1231 gain occurs and there is a nonrecaptured §1231 loss in the prior five years. 
D) It only applies when a §1231 gain occurs and there is a nonrecaptured §1231 gain in the prior five years. 
E) None of these. 
A) It only applies when a §1231 loss occurs. 
B) It only applies when a §1231 gain occurs. 
C) It only applies when a §1231 gain occurs and there is a nonrecaptured §1231 loss in the prior five years. 
D) It only applies when a §1231 gain occurs and there is a nonrecaptured §1231 gain in the prior five years. 
E) None of these.

Question 18

Which of the following is not true regarding an asset's adjusted basis?

Accepted Answer

A) Tax adjusted basis is usually greater than book adjusted basis. 
B) Tax adjusted basis is usually less than book adjusted basis. 
C) Adjusted basis is cost basis less cost recovery deductions. 
D) Tax adjusted basis may change over timE.The tax adjusted basis is usually less than book adjusted basis because tax depreciation usually exceeds book depreciation. 
A) Tax adjusted basis is usually greater than book adjusted basis. 
B) Tax adjusted basis is usually less than book adjusted basis. 
C) Adjusted basis is cost basis less cost recovery deductions. 
D) Tax adjusted basis may change over timE.The tax adjusted basis is usually less than book adjusted basis because tax depreciation usually exceeds book depreciation.

Question 19

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 20

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.

Exam 11: Property Dispositions

Jessie sold a piece of land held for investment for $250,000. Jessie bought the land two years ago for $195,000. What is the amount and character of Jessie's gain?

Explain whether the sale of a machine used in a trade or business that is sold at a loss generates an ordinary or capital loss?

The adjusted basis is the cost basis less cost recovery deductions.

Only accelerated depreciation is recaptured for §1245 assets.

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

Which of the following is not true regarding §1239?

Which one of the following is not true regarding a like-kind exchange?

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?

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

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

Ordinary gains and losses are obtained on the sale of investments.

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

Silver sold machinery to Gold, a related entity, which it used in its business for $55,000. Silver bought the equipment a few years ago for $50,000 and has claimed $15,000 of depreciation expense. What is the amount and character of Silver's gain?

§1239 recharacterizes 50 percent of the gain on sales to a related party as ordinary income.

Which of the following is true regarding the §1231 look-back rule?

Which of the following is not true regarding an asset's adjusted basis?

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

Why does §1250 recapture generally no longer apply?

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 Deductions

Investments

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Compensation

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

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

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?