Question 1

The general rule regarding the exchanged basis in the new property received 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 the choices are correct. 
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 the choices are correct.

Question 2

Realized gains are recognized unless there is specific exception.

Accepted Answer

A) True 
 B)False

Question 3

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)  Land can be like-kind with a building. 
E)  All of the choices are true. 
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)  Land can be like-kind with a building. 
E)  All of the choices are true.

Question 4

Butte sold a machine to a machine dealer for $50,000. Butte bought the machine for $55,000 several years ago and has claimed $12,500 of depreciation expense on the machine. What is the amount and character of Butte's gain or loss?

Accepted Answer

A)  $7,500 §1231 loss. 
B)  $5,000 §1231 loss. 
C)  $7,500 ordinary gain. 
D)  $7,500 capital gain. 
E)  None of the choices are correct. 
A)  $7,500 §1231 loss. 
B)  $5,000 §1231 loss. 
C)  $7,500 ordinary gain. 
D)  $7,500 capital gain. 
E)  None of the choices are correct.

Question 5

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 the choices are correct. 
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 the choices are correct.

Question 6

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 the choices 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 the choices qualify for installment sale treatment.

Question 7

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.
The $

Question 8

In a deferred like-kind exchange, the like-kind property to be received must be identified within 45 days and acquired within 180 days from the initial exchange.

Accepted Answer

A) True 
 B)False

Question 9

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 the choices are correct. 
A)  Purchase price 
B)  Sales tax 
C)  Shipping costs 
D)  Installation costs 
E)  None of the choices are correct.

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

Question 11

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 used in a trade or

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 the choices are correct. 
A)  Capital. 
B)  Ordinary. 
C)  §1231. 
D)  Investment. 
E)  None of the choices are correct.

Question 13

Which of the following transactions results solely in §1245 gain?

Accepted Answer

A)  Sale of machinery held for less than one year. 
B)  Sale of machinery held for more than one year and where the gain realized exceeds the accumulated depreciation. 
C)  Sale of machinery held for more than one year and where the accumulated depreciation exceeds the gain realized. 
D)  Sale of land held for more than one year and where the amount realized exceeds the adjusted basis. 
E)  None of the choices are correct. 
A)  Sale of machinery held for less than one year. 
B)  Sale of machinery held for more than one year and where the gain realized exceeds the accumulated depreciation. 
C)  Sale of machinery held for more than one year and where the accumulated depreciation exceeds the gain realized. 
D)  Sale of land held for more than one year and where the amount realized exceeds the adjusted basis. 
E)  None of the choices are correct.

Question 14

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 15

Redoubt LLC exchanged an office building used in its business for a rental house. Redoubt originally purchased the building for $80,000 and it had an adjusted basis of $53,000 at the time of the exchange. The rental house had a fair market value of $62,000. Redoubt also received $7,000 of cash in the transaction. What is Redoubt's gain or loss recognized on the exchange? What is Redoubt's basis in the rental house?

Accepted Answer

$7,000 gain. $53,000 basis in the rental

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Accounts receivable and inventory are examples of ordinary assets.

Accepted Answer

A) True 
 B)False

Question 18

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 the choices are correct. 
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 the choices are correct.

Question 19

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 the choices are correct. 
A)  Capital and Ordinary. 
B)  Ordinary only. 
C)  Capital and §1231. 
D)  §1245 and §1231. 
E)  None of the choices are correct.

Question 20

Andrea sold a piece of machinery she used in her business for 9 months. The amount realized was $50,000 and the adjusted basis was $55,000. What is Andrea's gain or loss realized and what is the character of the gain or loss?

Accepted Answer

$5,000 ordinary loss.
The real

Exam 11: Property Dispositions

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

Realized gains are recognized unless there is specific exception.

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

Butte sold a machine to a machine dealer for $50,000. Butte bought the machine for $55,000 several years ago and has claimed $12,500 of depreciation expense on the machine. What is the amount and character of Butte's gain or loss?

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 may qualify as an installment sale?

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?

In a deferred like-kind exchange, the like-kind property to be received must be identified within 45 days and acquired within 180 days from the initial exchange.

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

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

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?

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

Which of the following transactions results solely in §1245 gain?

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?

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

Accounts receivable and inventory are examples of ordinary assets.

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?

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?

Andrea sold a piece of machinery she used in her business for 9 months. The amount realized was $50,000 and the adjusted basis was $55,000. What is Andrea's gain or loss realized and what is the character of the gain or loss?

An Introduction to Tax

Tax Compliance, the IRS, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Dependents, 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

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