Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Residential real property is not like-kind with non-residential real property.

Accepted Answer

A) True 
 B)False

Question 3

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 4

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

Accepted Answer

A) True 
 B)False

Question 5

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 6

Sunshine LLC sold furniture for $75,000.Sunshine bought the furniture for $90,000 several years ago and has claimed $25,000 of depreciation expense on the machine.What is the amount and character of Sunshine's gain or loss?

Accepted Answer

The answer of Sunshine LLC sold furniture for $75,000.Sunshine bought...

Question 7

Koch traded machine 1 for machine 2 when the fair market value of both machines was $50,000.Koch originally purchased machine 1 for $75,000 and machine 1's adjusted basis was $40,000 at the time of the exchange.Machine 2's seller purchased it for $65,000 and machine 2's adjusted basis was $55,000 at the time of the exchange.What is Koch's adjusted basis in machine 2 after the exchange?

Accepted Answer

A) $40,000. 
B) $50,000. 
C) $55,000. 
D) $75,000. 
E) None of the choices are correct.

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

§1250 recaptures the excess of accelerated depreciation over straight-line depreciation on real property placed in service before 1987 as ordinary income.

Accepted Answer

A) True 
 B)False

Question 10

Boot is not like-kind property involved in a like-kind exchange.

Accepted Answer

A) True 
 B)False

Question 11

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.

Question 12

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 13

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.

Question 14

Bateman Corporation sold an office building that it used in its business for $800,000.Bateman bought the building ten 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 15

The sale of machinery at a loss that was used in a trade or business and held for more than one year results in the following type of loss?

Accepted Answer

A) Capital. 
B) §291. 
C) §1231. 
D) §1245. 
E) None of the choices are correct.

Question 16

§1231 assets include all assets used in a trade or business.

Accepted Answer

A) True 
 B)False

Question 17

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 18

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

Accepted Answer

A) True 
 B)False

Question 19

Taxpayers can recognize a taxable gain on the sale of an asset even though an asset's real economic value has declined.

Accepted Answer

A) True 
 B)False

Question 20

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.

Exam 10: Property Dispositions

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

Residential real property is not like-kind with non-residential real property.

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

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

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?

Sunshine LLC sold furniture for $75,000.Sunshine bought the furniture for $90,000 several years ago and has claimed $25,000 of depreciation expense on the machine.What is the amount and character of Sunshine's gain or loss?

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

§1250 recaptures the excess of accelerated depreciation over straight-line depreciation on real property placed in service before 1987 as ordinary income.

Boot is not like-kind property involved in a like-kind exchange.

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?

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?

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?

Bateman Corporation sold an office building that it used in its business for $800,000.Bateman bought the building ten 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?

The sale of machinery at a loss that was used in a trade or business and held for more than one year results in the following type of loss?

§1231 assets include all assets used in a trade or business.

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

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

Taxpayers can recognize a taxable gain on the sale of an asset even though an asset's real economic value has declined.

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