Question 1

For a like-kind exchange, realized gain is deferred if the exchange is solely for like-kind property.

Accepted Answer

A) True 
 B)False

Question 2

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A) Congress repealed the code section.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.

Question 3

The §1231 look-back rule recharacterizes §1231 gains if §1231 losses have created ordinary losses in the last five years.

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

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

The answer of Luke sold land valued at $210,000.His original...

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Bateman Corporation sold an office building that it used in its business for $800,000.Bateman bought the building 10 years ago for $600,000 and has claimed $200,000 of depreciation expense.What is the amount and character of Bateman's gain or loss?

Accepted Answer

A) $40,000 ordinary and $360,000 §1231 gain. 
B) $200,000 ordinary and $200,000 §1231 gain. 
C) $400,000 ordinary gain. 
D) $400,000 capital gain. 
E) None of the choices are correct.

Question 8

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.

Question 9

Gainesville LLC sold the following business assets during the current year: (1)machinery, $20,000 cost basis, $4,000 depreciation, $22,000 proceeds; (2)automobile, $15,000 cost basis, $12,000 depreciation, $7,000 proceeds; (3)equipment, $15,000 cost basis, $10,000 depreciation, $4,000 proceeds; (4)computer equipment, $35,000 cost basis, $16,000 depreciation, $15,000 proceeds; (5)Winchester had unrecaptured §1231 losses of $5,000 in the prior five years.What is the amount and character of Winchester's gains and losses before the 1231 netting process?

Accepted Answer

The answer of Gainesville LLC sold the following business assets...

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

Which of the following realized gains results in a recognized gain?

Accepted Answer

A) Farmland traded for an office building. 
B) Sale to a related party. 
C) Involuntary conversion. 
D) Iowa cropland exchanged for a Minnesota warehouse.

Question 13

Frederique sold furniture that she uses in her business for $15,000.Frederique bought the furniture a few years ago for $40,000 and has claimed $20,000 of depreciation expense.What is the amount and character of Frederique's gain or loss?

Accepted Answer

The answer of Frederique sold furniture that she uses in...

Question 14

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

Question 15

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 16

Which of the following sections does not recapture or recharacterize a taxpayer's gain?

Accepted Answer

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

Question 17

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

The answer of Odintz traded land for land.Odintz originally purchased...

Question 18

Accounts receivable and inventory are examples of ordinary assets.

Accepted Answer

A) True 
 B)False

Question 19

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 that he acquired six months later for $390,000.What is the amount of Reid's realized gain and recognized gain?

Accepted Answer

The answer of Reid had a business building destroyed in...

Question 20

Which of the following gains does not result solely in an ordinary gain or loss?

Accepted Answer

A) Sale of equipment held for less than a year. 
B) Sale of inventory. 
C) Sale of equipment where the gain realized exceeds the accumulated depreciation. 
D) Sale of equipment where the accumulated depreciation exceeds the gain realized. 
E) None of the choices are correct.

Exam 11: Property Dispositions

For a like-kind exchange, realized gain is deferred if the exchange is solely for like-kind property.

Why does §1250 recapture generally no longer apply?

The §1231 look-back rule recharacterizes §1231 gains if §1231 losses have created ordinary losses in the last five years.

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

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?

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

Bateman Corporation sold an office building that it used in its business for $800,000.Bateman bought the building 10 years ago for $600,000 and has claimed $200,000 of depreciation expense.What is the amount and character of Bateman's gain or loss?

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?

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

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

Which of the following realized gains results in a recognized gain?

Frederique sold furniture that she uses in her business for $15,000.Frederique bought the furniture a few years ago for $40,000 and has claimed $20,000 of depreciation expense.What is the amount and character of Frederique's gain or loss?

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

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

Which of the following sections does not recapture or recharacterize a taxpayer's gain?

Accounts receivable and inventory are examples of ordinary assets.

Which of the following gains does not result solely in an ordinary gain or loss?