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Exam 3: Property Dispositions

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Question 61

Multiple Choice

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The sale of computer equipment used in a trade or business for nine months results in which of the following types of gain or loss?

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

F) B) and C)
G) C) and D)

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Question 62

Multiple Choice

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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?

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.

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

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Question 63

Multiple Choice

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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?

Redoubt LLC exchanged an office building used in its business for a rental house. Redoubt originally purchased the building for $80,000, and it had an adjusted basis of $53,000 at the time of the exchange. The rental house had a fair market value of $62,000. Redoubt also received $7,000 of cash in the transaction. What is Redoubt's gain or loss recognized on the exchange? What is Redoubt's basis in the rental house?

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

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

Arlington LLC exchanged land used in its business for some new land. Arlington originally purchased the land it exchanged for $28,500. The new land had a fair market value of $35,250. Arlington also received $2,500 of office equipment in the transaction. What is Arlington'srecognized gain or loss on the exchange?

What is the character of land used in an active trade or business for two years?

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

All tax gains and losses are ultimately characterized as either ordinary or capital.

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

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?

The gain or loss realized on the sale of an asset is always recognized for tax purposes.

Reid had a business building destroyed in a fire. The old building was purchased for $375,550, and $58,900 of depreciation deductions had been taken. Although the old building had a fair market value of $424,945 at the time of the fire, his insurance proceeds were limited to $398,900. Reid found qualified replacement property that he acquired six months later for $389,450. What is the amount of Reid's realized gain and recognized gain?

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

Sadie sold 10 shares of stock to her brother, George, for $530 16 months ago. Sadie had purchased the stock for $660 two years earlier. If George sells the stock for $790, what are the amount and character of his recognized gain or loss in the current year?

A net §1231 gain becomes ordinary while a net §1231 loss becomes long-term capital gain.

Bateman Corporation sold an office building that it used in its business for $800,250. Bateman bought the building 10 years ago for $599,875 and has claimed $200,375 of depreciation expense. What is the amount and character of Bateman's gain or loss?

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

Winchester LLC sold the following business assets during the current year: (1) automobile, $30,000 cost basis, $12,000 depreciation, $20,000 proceeds; (2) machinery, $25,000 cost basis, $20,000 depreciation, $10,000 proceeds; (3) furniture, $15,000 cost basis, $10,000 depreciation, $4,000 proceeds; (4) computer equipment, $25,000 cost basis, $6,000 depreciation, $10,000 proceeds; (5) Winchester had unrecaptured §1231 losses of $3,000 in the prior five years. What are 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.