Question 1

The gain or loss realized on the sale of an asset is the amount realized less the adjusted basis.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following results in an ordinary gain or loss?

Accepted Answer

A)  Sale of a machine at a gain. 
B)  Sale of stock held for investment. 
C)  Sale of a §1231 asset. 
D)  Sale of inventory. 
E)  None of the choices are correct. 
A)  Sale of a machine at a gain. 
B)  Sale of stock held for investment. 
C)  Sale of a §1231 asset. 
D)  Sale of inventory. 
E)  None of the choices are correct.

Question 3

Which of the following sections recaptures or recharacterizes only corporate taxpayer's gains?

Accepted Answer

A)  §291. 
B)  §1239. 
C)  §1245. 
D)  Unrecaptured §1250 gains. 
E)  None of the choices are correct. 
A)  §291. 
B)  §1239. 
C)  §1245. 
D)  Unrecaptured §1250 gains. 
E)  None of the choices are correct.

Question 4

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

Accepted Answer

A)  Machinery. 
B)  Automobile. 
C)  Business cell phone. 
D)  Land. 
E)  None of the choices are correct. 
A)  Machinery. 
B)  Automobile. 
C)  Business cell phone. 
D)  Land. 
E)  None of the choices are correct.

Question 5

Foreaker LLC sold a piece of land that it uses in its business for $52,000. Foreaker bought the land two years ago for $42,500. What is the amount and character of Foreaker's gain?

Accepted Answer

A)  $9,500 §1221. 
B)  $9,500 §1231. 
C)  $9,500 §1245. 
D)  $9,500 §1250. 
E)  None of the choices are correct. 
A)  $9,500 §1221. 
B)  $9,500 §1231. 
C)  $9,500 §1245. 
D)  $9,500 §1250. 
E)  None of the choices are correct.

Question 6

Depreciation recapture changes both the amount and character of a gain.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is not an involuntary conversion?

Accepted Answer

A)  Destruction caused by a hurricane. 
B)  Imminent domain. 
C)  A foreclosure. 
D)  Fire damage. 
E)  All of these choices are involuntary conversions. 
A)  Destruction caused by a hurricane. 
B)  Imminent domain. 
C)  A foreclosure. 
D)  Fire damage. 
E)  All of these choices are involuntary conversions.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

A parcel of land is always a capital asset.

Accepted Answer

A) True 
 B)False

Question 11

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 12

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

Accepted Answer

A) True 
 B)False

Question 13

Arlington LLC exchanged land used in its business for some new land. Arlington originally purchased the land for $28,000. The new land 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 the choices are correct. 
A)  $0. 
B)  $2,000. 
C)  $7,000. 
D)  $9,000. 
E)  None of the choices are correct.

Question 14

For corporations, §291 recaptures 20 percent of the lesser of depreciation taken or the realized gain as ordinary income.

Accepted Answer

A) True 
 B)False

Question 15

Sandra sold some equipment for $10,000 in cash, $1,000 of office products, the buyer assumption of her $1,500 loan, and incurred selling expenses of $500. What is the Sandra's amount realized in the transaction?

Accepted Answer

$12,000.
The amount realized is everythi

Question 16

The §1231 look-back rule applies whether there is a net gain or loss.

Accepted Answer

A) True 
 B)False

Question 17

Brandon, an individual, began business four years ago and has sold §1231 assets with $5,000 of losses within the last 5 years. Brandon owned each of the assets for several years. In the current year, Brandon sold the following business assets:   Assuming Brandon's marginal ordinary income tax rate is 32 percent, what effect do the gains and losses have on Brandon's tax liability?
Use Dividends and Capital Gains Tax Rates for reference.

Accepted Answer

A)  $25,000 ordinary income, $8,000 tax liability. 
B)  $25,000 §1231 gain and $3,750 tax liability. 
C)  $13,000 §1231 gain, $12,000 ordinary income, and $5,790 tax liability. 
D)  $12,000 §1231 gain, $13,000 ordinary income, and $5,960 tax liability. 
E)  None of the choices are correct. 
A)  $25,000 ordinary income, $8,000 tax liability. 
B)  $25,000 §1231 gain and $3,750 tax liability. 
C)  $13,000 §1231 gain, $12,000 ordinary income, and $5,790 tax liability. 
D)  $12,000 §1231 gain, $13,000 ordinary income, and $5,960 tax liability. 
E)  None of the choices are correct.

Question 18

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

Accepted Answer

A)  $7,000 ordinary income, $1,000 §1231 loss and $1,920 tax liability. 
B)  $6,000 ordinary income and $1,920 tax liability. 
C)  $7,000 §1231 gain and $2,240 tax liability. 
D)  $7,000 §1231 gain and $1,050 tax liability. 
E)  None of the choices are correct. 
A)  $7,000 ordinary income, $1,000 §1231 loss and $1,920 tax liability. 
B)  $6,000 ordinary income and $1,920 tax liability. 
C)  $7,000 §1231 gain and $2,240 tax liability. 
D)  $7,000 §1231 gain and $1,050 tax liability. 
E)  None of the choices are correct.

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

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? Assume all assets were held for more than one year.

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 the choices are correct. 
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 the choices are correct.

The gain or loss realized on the sale of an asset is the amount realized less the adjusted basis.

Which of the following results in an ordinary gain or loss?

Which of the following sections recaptures or recharacterizes only corporate taxpayer's gains?

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

Foreaker LLC sold a piece of land that it uses in its business for $52,000. Foreaker bought the land two years ago for $42,500. What is the amount and character of Foreaker's gain?

Depreciation recapture changes both the amount and character of a gain.

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

Which of the following is not an involuntary conversion?

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

A parcel of land is always a capital asset.

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

For corporations, §291 recaptures 20 percent of the lesser of depreciation taken or the realized gain as ordinary income.

Sandra sold some equipment for $10,000 in cash, $1,000 of office products, the buyer assumption of her $1,500 loan, and incurred selling expenses of $500. What is the Sandra's amount realized in the transaction?

The §1231 look-back rule applies whether there is a net gain or loss.

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

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

Exam 11: Property Dispositions

The gain or loss realized on the sale of an asset is the amount realized less the adjusted basis.

Which of the following results in an ordinary gain or loss?

Which of the following sections recaptures or recharacterizes only corporate taxpayer's gains?

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

Foreaker LLC sold a piece of land that it uses in its business for $52,000. Foreaker bought the land two years ago for $42,500. What is the amount and character of Foreaker's gain?

Depreciation recapture changes both the amount and character of a gain.

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

Which of the following is not an involuntary conversion?

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

A parcel of land is always a capital asset.

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

For corporations, §291 recaptures 20 percent of the lesser of depreciation taken or the realized gain as ordinary income.

Sandra sold some equipment for $10,000 in cash, $1,000 of office products, the buyer assumption of her $1,500 loan, and incurred selling expenses of $500. What is the Sandra's amount realized in the transaction?

The §1231 look-back rule applies whether there is a net gain or loss.

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

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