Question 1

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

Accepted Answer

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

Question 2

A taxpayer that receives boot in a like-kind exchange resulting in a gain recognizes as gain the lesser of the fair market value of the boot received or the gain realized.

Accepted Answer

A) True 
 B)False

Question 3

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

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

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Koch traded Machine 1 for Machine 2 when the fair market value of both machines was $49,150. Koch originally purchased Machine 1 for $76,700, and Machine 1's adjusted basis was $40,850 at the time of the exchange. Machine 2's seller purchased it for $64,150 and Machine 2's adjusted basis was $55,850 at the time of the exchange. What is Koch's adjusted basis in machine 2 after the exchange?

Accepted Answer

A)  $40,850. 
B)  $49,150. 
C)  $55,850. 
D)  $76,700. 
E)  None of the choices are correct.

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Brad sold a rental house that he owned for $247,000. Brad bought the rental house five years ago for $228,000 and has claimed $48,500 of depreciation expense. What is the amount and character of Brad's gain or loss?

Accepted Answer

A)  $19,000 ordinary and $48,500 unrecaptured §1250 gain. 
B)  $19,000 §1231 gain and $48,500 unrecaptured §1250 gain. 
C)  $19,000 capital and $48,500 ordinary gain. 
D)  $67,500 ordinary gain. 
E)  None of the choices are correct.

Question 8

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...

Question 9

An installment sale is any sale where at least a portion of the sale proceeds is received in a subsequent taxable year.

Accepted Answer

A) True 
 B)False

Question 10

Residential real property is not like-kind with nonresidential real property.

Accepted Answer

A) True 
 B)False

Question 11

Butte sold a machine to a machine dealer for $50,600. Butte bought the machine for $54,400 several years ago and has claimed $12,200 of depreciation expense on the machine. What is the amount and character of Butte's gain or loss?

Accepted Answer

A)  $8,400 §1231 loss. 
B)  $3,800 §1231 loss. 
C)  $8,400 ordinary gain. 
D)  $8,400 capital gain. 
E)  None of the choices are correct.

Question 12

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.

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Collins Corporation, of Camden, Maine, wants to exchange its manufacturing facility for Rockland Company's building. Both parties agree that Collins's facility is worth $200,000 and that Rockland's building is worth $175,000. Collins will not enter into the transaction unless it qualifies as a like-kind exchange. If Collins wants to avoid gain, what could the parties do to equalize the value exchanged but still allow the exchange to qualify as a like-kind exchange?

Accepted Answer

The answer of Collins Corporation, of Camden, Maine, wants to...

Question 15

Which of the following is not true regarding an asset's adjusted basis?

Accepted Answer

A)  Tax-adjusted basis is usually greater than book-adjusted basis. 
B)  Tax-adjusted basis is usually less than book-adjusted basis. 
C)  Adjusted basis is cost basis less cost recovery deductions. 
D)  Tax-adjusted basis may change over time.

Question 16

Peroni Corporation sold a parcel of land valued at $300,000. Its basis in the land was $250,000. For the land, Peroni received $150,000 in cash in the current year and a note providing Peroni with $150,000 in the subsequent year. What is Peroni's recognized gain in the current and subsequent year, respectively?

Accepted Answer

A)  $0, $50,000. 
B)  $10,000, $40,000. 
C)  $25,000, $25,000. 
D)  $50,000, $0. 
E)  None of the choices are correct.

Question 17

Each of the following is true except for:

Accepted Answer

A)  a direct involuntary conversion occurs when property taken under eminent 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 18

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.

Question 19

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)  The exchanged property must be like-kind. 
E)  All of the choices are correct.

Question 20

Which of the following is not an involuntary conversion?

Accepted Answer

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

Exam 3: Property Dispositions

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

A taxpayer that receives boot in a like-kind exchange resulting in a gain recognizes as gain the lesser of the fair market value of the boot received or the gain realized.

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

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

Brad sold a rental house that he owned for $247,000. Brad bought the rental house five years ago for $228,000 and has claimed $48,500 of depreciation expense. What is the amount and character of Brad's gain or loss?

An installment sale is any sale where at least a portion of the sale proceeds is received in a subsequent taxable year.

Residential real property is not like-kind with nonresidential real property.

Butte sold a machine to a machine dealer for $50,600. Butte bought the machine for $54,400 several years ago and has claimed $12,200 of depreciation expense on the machine. What is the amount and character of Butte's gain or loss?

Which of the following is not true regarding installment sales?

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

Which of the following is not true regarding an asset's adjusted basis?

Each of the following is true except for:

Which of the following may qualify as an installment sale?

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

Which of the following is not an involuntary conversion?