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Exam 11: Property Dispositions

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Question 31

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Suzanne, an individual, began business four years ago and has never sold a §1231 asset. Suzanne owned each of the assets for several years. In the current year, Suzanne sold the following business assets: Assuming Suzanne's marginal ordinary income tax rate is 32 percent, what is the character of the gains and losses and what affect do they have on Suzanne's tax liability?

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$6,000 ordinary gain, $12,000 unrecaptur...

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Question 32

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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?

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

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

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Question 33

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Which of the following is not used in the calculation of the amount realized:

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

Which one of the following is not True regarding a like-kind exchange?

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

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?

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

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

What is the primary purpose of a third-party intermediary in a deferred like-kind exchange?

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

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

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?

Unrecaptured §1250 gains apply only to individuals.

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

Which of the following does not ultimately result in a capital 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?

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?

Which of the following is not an involuntary conversion?

Mary exchanged an office building used in her business for some land. Mary originally purchased the building for $45,000 and it had an adjusted basis of $20,000 at the time of the exchange. The land had a fair market value of $40,000. Mary also gave $4,000 to the  in the transaction. What is Mary's adjusted basis in the land after the exchange?