Question 1

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 the choices can be considered as boot. 
A)  Cash. 
B)  Other property. 
C)  Mortgage given. 
D)  Mortgage received. 
E)  All of the choices can be considered as boot.

Question 2

After application of the look-back rule, net §1231 gains become capital while net §1231 losses become ordinary.

Accepted Answer

A) True 
 B)False

Question 3

Why does §1250 recapture generally no longer apply?

Accepted Answer

A)  Congress repealed the code section. 
B)  Real property is depreciated using the straight-line method after 1986. 
C)  §1245 recapture trumps §1250 recapture. 
D)  Because unrecaptured §1250 gains now apply to all taxpayers instead. 
E)  None of the choices are correct. 
A)  Congress repealed the code section. 
B)  Real property is depreciated using the straight-line method after 1986. 
C)  §1245 recapture trumps §1250 recapture. 
D)  Because unrecaptured §1250 gains now apply to all taxpayers instead. 
E)  None of the choices are correct.

Question 4

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 the choices are correct. 
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 the choices are correct.

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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 the choices are true. 
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 the choices are true.

Question 7

The amount realized is the sale proceeds less the adjusted basis.

Accepted Answer

A) True 
 B)False

Question 8

Tyson had a parcel of undeveloped investment land that he wanted to trade for a warehouse to be used in his business. He found a buyer willing to pay him $450,000 for the land. He transferred the land to a third party intermediary on April 1st of the current year. On May 10th, with the help of a commercial real estate agent, Tyson identified two suitable warehouses. On August 10th he made an offer on the first building which was rejected. On August 13th an offer was accepted on the second warehouse. On September 23rd the third party intermediary transferred $500,000 ($450,000 from the original property plus $50,000 from Tyson) to the seller and conveyed title to the warehouse to Tyson. Explain whether the exchange of property qualifies as a like-kind exchange.

Accepted Answer

Yes, the exchange of property qualifies

Question 9

Kristi had a business building destroyed in an earthquake. The old building was purchased for $250,000 and $80,000 of depreciation deductions had been taken. Her insurance proceeds were $550,000. Although the replacement property was much larger and nicer than her old building, Kristi's new property qualified as replacement property. She acquired the new property 13 months after the earthquake for $620,000. What is the amount of Kristi's realized gain and recognized gain and the basis in her new property?

Accepted Answer

$380,000 realized gain, $0 recognized ga

Question 10

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

Accepted Answer

A) True 
 B)False

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

Bull Run sold a computer for $1,200 on November 10th of the current year. The computer was purchased for $2,800. Bull Run had taken $1,000 of depreciation deductions. What is Bull Run's gain or loss realized on the computer?

Accepted Answer

$600 loss realized.
The gain o

Question 13

Which of the following is not true regarding installment sales?

Accepted Answer

A)  Only gains are eligible for installment sale reporting. 
B)  Depreciation recapture is deferred in an installment sale. 
C)  The gross profit percentage is needed to determine the annual gain recognized. 
D)  Stock sales are ineligible for installment sale treatment. 
E)  None of the choices are correct. 
A)  Only gains are eligible for installment sale reporting. 
B)  Depreciation recapture is deferred in an installment sale. 
C)  The gross profit percentage is needed to determine the annual gain recognized. 
D)  Stock sales are ineligible for installment sale treatment. 
E)  None of the choices are correct.

Question 14

Odintz traded land for land. Odintz originally purchased its land for $150,000. The land received was purchased for $200,000 and was subject to a mortgage of $50,000 that was paid off before the transfer. The fair market value of the new land is $240,000. What is Odintz's adjusted basis in the new land after the exchange?

Accepted Answer

$150,000.
The exchange qualifi

Question 15

The sale of land held for investment results in the following type of gain or loss?

Accepted Answer

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

Question 16

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 the choices are correct. 
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 the choices are correct.

Question 17

Suzanne, an individual, began business four years ago and has never sold a §1231 asset. Suzanne owned each of the assets for several years. In the current year, Suzanne sold the following business assets:
   Assuming Suzanne's marginal ordinary income tax rate is 32 percent, what is the character of the gains and losses and what affect do they have on Suzanne's tax liability?

Accepted Answer

$6,000 ordinary gain, $12,000 unrecaptur

Question 18

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 the choices are correct. 
A)  $10,000 §1231 loss. 
B)  $10,000 §1245 loss. 
C)  $50,000 ordinary loss. 
D)  $10,000 capital loss. 
E)  None of the choices are correct.

Question 19

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 20

Unrecaptured §1250 gains apply only to individuals.

Accepted Answer

A) True 
 B)False

Exam 11: Property Dispositions

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

After application of the look-back rule, net §1231 gains become capital while net §1231 losses become ordinary.

Why does §1250 recapture generally no longer apply?

Which of the following is not true regarding §1239?

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

Each of the following is true except for:

The amount realized is the sale proceeds less the adjusted basis.

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

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

Bull Run sold a computer for $1,200 on November 10th of the current year. The computer was purchased for $2,800. Bull Run had taken $1,000 of depreciation deductions. What is Bull Run's gain or loss realized on the computer?

Which of the following is not true regarding installment sales?

The sale of land held for investment results in the following type of gain or loss?

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

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?

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?

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, 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

Filters

Bull Run sold a computer for $1,200 on November 10^th of the current year. The computer was purchased for $2,800. Bull Run had taken $1,000 of depreciation deductions. What is Bull Run's gain or loss realized on the computer?