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Which of the following is not usually included in an asset's tax basis?


A) Purchase price.
B) Sales tax.
C) Shipping costs.
D) Installation costs.
E) None of the choices are correct.

F) A) and B)
G) A) and E)

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The general rule regarding the exchanged basis in the new property received in a like-kind exchange is:


A) The basis is equal to the fair market value of the new property.
B) The basis is equal to the fair market value of the old property.
C) The basis is equal to the adjusted basis of the old property.
D) The basis is equal to the cost basis of the old property.
E) All of the choices are correct.

F) None of the above
G) B) and D)

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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: 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? 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. Assuming Brandon's marginal ordinary income tax rate is 32 percent, what effect do the gains and losses have on Brandon's tax liability?


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.

F) B) and E)
G) A) and C)

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Bozeman sold equipment that it uses in its business for $80,000. Bozeman bought the equipment two years ago for $75,000 and has claimed $20,000 of depreciation expense. What is the amount and character of Bozeman's gain or loss?


A) $25,000 §1231 gain.
B) $20,000 ordinary gain, and $5,000 §1231 gain.
C) $5,000 ordinary gain, and $20,000 §1231 gain.
D) $25,000 capital gain.
E) None of the choices are correct.

F) A) and B)
G) A) and C)

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


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.

F) C) and E)
G) A) and D)

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


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.

F) C) and E)
G) A) and E)

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Realized gains are recognized unless there is specific exception.

A) True
B) False

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Brandon, an individual, began business four years ago and has sold §1231 assets with $5,000 of losses within the last five years. Brandon owned each of the assets for several years. In the current year, Brandon sold the following business assets: Brandon, an individual, began business four years ago and has sold §1231 assets with $5,000 of losses within the last five 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. A) $25,000 ordinary income and $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. 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.


A) $25,000 ordinary income and $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.

F) A) and B)
G) All of the above

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

A) True
B) False

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Koch traded Machine 1 for Machine 2when 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?


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

F) B) and E)
G) B) and D)

Correct Answer

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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 and 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.

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Yes, the exchange of property qualifies ...

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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?


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.

F) None of the above
G) D) and E)

Correct Answer

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Sumner sold equipment that it uses in its business for $30,700. Sumner bought the equipment a few years ago for $79,650 and has claimed $39,825 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?


A) $9,125 §1231 loss.
B) $9,125 §1245 loss.
C) $48,950 ordinary loss.
D) $9,125 capital loss.
E) None of the choices are correct.

F) None of the above
G) B) and D)

Correct Answer

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

A) True
B) False

Correct Answer

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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?

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$10,000 ordinary gain.
§1245 r...

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Misha traded computer equipment used in her business to a computer dealer for some new computer equipment. Misha originally purchased the computer equipment for $14,050, and it had an adjusted basis of $11,190 at the time of the exchange.The computer equipment was worth $21,500 at the time of the exchange. Misha also received a used copier worth $1,905 in the transaction. What is Misha's realized and recognized gain/loss on the exchange?

Correct Answer

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${{[a(5)]:#,###}} realized and recognize...

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Brad sold a rental house that he owned for $250,000. Brad bought the rental house five years ago for $225,000 and has claimed $50,000 of depreciation expense. What is the amount and character of Brad's gain or loss?


A) $25,000 ordinary and $50,000 unrecaptured §1250 gain.
B) $25,000 §1231 gain and $50,000 unrecaptured §1250 gain.
C) $25,000 capital and $50,000 ordinary gain.
D) $75,000 ordinary gain.
E) None of the choices are correct.

F) B) and D)
G) None of the above

Correct Answer

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Which of the following may qualify as an installment sale?


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.

F) A) and B)
G) B) and E)

Correct Answer

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Jessie sold a piece of land held for investment for $250,300. Jessie bought the land two years ago for $192,150. What is the amount and character of Jessie's gain?

Correct Answer

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Capital gain of ${{[a(3)]:#,##...

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Which of the following is true regarding depreciation recapture?


A) Changes the character of a loss.
B) Changes the character of a gain.
C) Changes the amount of a gain.
D) Only applies to ordinary assets.
E) None of the choices are correct.

F) B) and C)
G) A) and E)

Correct Answer

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