Question 1

Each of the following is true except for:

Accepted Answer

A) A direct involuntary conversion occurs when property taken under imminent domain is replaced with other property. 
B) Qualified replacement property rules are more restrictive than the like-kind property rules. 
C) An indirect involuntary conversion occurs when property is destroyed and insurance proceeds are used to purchase qualified replacement property. 
D) Losses realized in involuntary conversions are deferred. 
E) All of these are truE.Losses realized in an involuntary conversion are realized;while losses realized in a like-kind exchange are deferred. 
A) A direct involuntary conversion occurs when property taken under imminent domain is replaced with other property. 
B) Qualified replacement property rules are more restrictive than the like-kind property rules. 
C) An indirect involuntary conversion occurs when property is destroyed and insurance proceeds are used to purchase qualified replacement property. 
D) Losses realized in involuntary conversions are deferred. 
E) All of these are truE.Losses realized in an involuntary conversion are realized;while losses realized in a like-kind exchange are deferred.

Question 2

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.Mortgage received is treated as transferring cash to the other party,and thus it is not boot to the recipient. 
A) Cash. 
B) Other property. 
C) Mortgage given. 
D) Mortgage received. 
E) All of thesE.Mortgage received is treated as transferring cash to the other party,and thus it is not boot to the recipient.

Question 3

An asset's tax adjusted basis is usually greater than its book adjusted basis.

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

For an installment sale,the gross profit percentage is the gain recognized divided by the gain realized.The gross profit percentage is the gain realized divided by the amount realized.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

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 machin

Question 8

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.§1239 only applies to gains on sales of depreciable property between related taxpayers. 
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.§1239 only applies to gains on sales of depreciable property between related taxpayers.

Question 9

The general rule regarding the exchanged basis in a like-kind exchange is:

Accepted Answer

A) The basis is equal to the fair market value of the new property. 
B) The basis is equal to the fair market value of the old property. 
C) The basis is equal to the adjusted basis of the old property. 
D) The basis is equal to the cost basis of the old property. 
E) All of thesE.The general rule is that the property receives a carryover basis from the old property. 
A) The basis is equal to the fair market value of the new property. 
B) The basis is equal to the fair market value of the old property. 
C) The basis is equal to the adjusted basis of the old property. 
D) The basis is equal to the cost basis of the old property. 
E) All of thesE.The general rule is that the property receives a carryover basis from the old property.

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is true regarding the §1231 lookback 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.The lookback rule only recharacterizes a current year 1231 gain if there are 1231 losses from the prior 5 years. 
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.The lookback rule only recharacterizes a current year 1231 gain if there are 1231 losses from the prior 5 years.

Question 12

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.The exchange must be completed by the due date of the taxpayer's return including extensions. 
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.The exchange must be completed by the due date of the taxpayer's return including extensions.

Question 13

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 of the related party begins over. 
C) The related party always receives a carryover basis. 
D) The seller's realized loss is deferred until the buyer sells the assets. 
E) None of thesE.See the explanation in the text. 
A) The tax laws essentially treat related parties as the same taxpayer. 
B) The holding period of the related party begins over. 
C) The related party always receives a carryover basis. 
D) The seller's realized loss is deferred until the buyer sells the assets. 
E) None of thesE.See the explanation in the text.

Question 14

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.The gain recognized is the lesser of the fair market value of the boot ($2,000 of office equipment) or realized gain of $9,000 ($35,000 fair market value plus $2,000 boot less $28,000 adjusted basis) . 
A) $0. 
B) $2,000. 
C) $7,000. 
D) $9,000. 
E) None of thesE.The gain recognized is the lesser of the fair market value of the boot ($2,000 of office equipment) or realized gain of $9,000 ($35,000 fair market value plus $2,000 boot less $28,000 adjusted basis) .

Question 15

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.All of the assets are §1231 assets: automobile $2,000 gain,machinery $5,000 gain,furniture $1,000 loss,and equipment $9,000 loss.This results in $7,000 ordinary gain and $10,000 1231 loss.The 1231 lookback rule only applies when there is a net 1231 gain. 
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.All of the assets are §1231 assets: automobile $2,000 gain,machinery $5,000 gain,furniture $1,000 loss,and equipment $9,000 loss.This results in $7,000 ordinary gain and $10,000 1231 loss.The 1231 lookback rule only applies when there is a net 1231 gain.

Question 16

Generally,the amount realized is everything of value received in a sale less selling expenses.

Accepted Answer

A) True 
 B)False

Question 17

Sumner sold equipment that it uses in its business for $30,000.Sumner bought the equipment a few years ago for $80,000 and has claimed $40,000 of depreciation expense.Assuming that this is Sumner's only disposition during the year,what is the amount and character of Sumner's gain or loss?

Accepted Answer

A) $10,000 §1231 loss. 
B) $10,000 §1245 loss. 
C) $50,000 ordinary loss. 
D) $10,000 capital loss. 
E) None of thesE.There is no depreciation recapture when a §1231 asset is sold at a loss. 
A) $10,000 §1231 loss. 
B) $10,000 §1245 loss. 
C) $50,000 ordinary loss. 
D) $10,000 capital loss. 
E) None of thesE.There is no depreciation recapture when a §1231 asset is sold at a loss.

Question 18

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.Land and depreciable assets used in a trade or business for more than one year are §1231 assets. 
A) Capital. 
B) Ordinary. 
C) §1231. 
D) Investment. 
E) None of thesE.Land and depreciable assets used in a trade or business for more than one year are §1231 assets.

Question 19

A parcel of land is always a capital asset.

Accepted Answer

A) True 
 B)False

Question 20

The §1231 lookback rule applies whether there is a net gain or loss.

Accepted Answer

A) True 
 B)False

Each of the following is true except for:

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

An asset's tax adjusted basis is usually greater than its book adjusted basis.

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

For an installment sale,the gross profit percentage is the gain recognized divided by the gain realized.The gross profit percentage is the gain realized divided by the amount realized.

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

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?

Which of the following is not true regarding §1239?

The general rule regarding the exchanged basis in a like-kind exchange is:

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

Which of the following is true regarding the §1231 lookback rule?

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

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

Generally,the amount realized is everything of value received in a sale less selling expenses.

Sumner sold equipment that it uses in its business for $30,000.Sumner bought the equipment a few years ago for $80,000 and has claimed $40,000 of depreciation expense.Assuming that this is Sumner's only disposition during the year,what is the amount and character of Sumner's gain or loss?

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

A parcel of land is always a capital asset.

The §1231 lookback rule applies whether there is a net gain or loss.

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Tax Overview

Gross Income and Exclusions

Individual Deductions

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Investments

Compensation

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

Filters

Exam 10: Property Dispositions

Each of the following is true except for:

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

An asset's tax adjusted basis is usually greater than its book adjusted basis.

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

For an installment sale,the gross profit percentage is the gain recognized divided by the gain realized.The gross profit percentage is the gain realized divided by the amount realized.

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

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?

Which of the following is not true regarding §1239?

The general rule regarding the exchanged basis in a like-kind exchange is:

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

Which of the following is true regarding the §1231 lookback rule?

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

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

Generally,the amount realized is everything of value received in a sale less selling expenses.

Sumner sold equipment that it uses in its business for $30,000.Sumner bought the equipment a few years ago for $80,000 and has claimed $40,000 of depreciation expense.Assuming that this is Sumner's only disposition during the year,what is the amount and character of Sumner's gain or loss?

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

A parcel of land is always a capital asset.

The §1231 lookback rule applies whether there is a net gain or loss.

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Tax Overview

Gross Income and Exclusions

Individual Deductions

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Investments

Compensation

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

Filters