Question 1

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?

Accepted Answer

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) C) and D)
G) A) and B)

Question 2

A parcel of land is always a capital asset.

Accepted Answer

A) True 
 B)False

Question 3

Andrew,an individual,began business four years ago and has never sold a §1231 asset.Andrew owned each of the assets for several years.In the current year,Andrew sold the following business assets:
  Assuming Andrew's marginal ordinary income tax rate is 30 percent,what is the character of the gains and losses and what affect do they have on Andrew's tax liability?

Accepted Answer

$4,000 ordinary income and $1,200 of tax...

Question 4

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

$8,571 gain recognized in the current ye...

Question 5

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.F) A) and B)
G) None of the above

Question 6

Which of the following is how gain or loss realized is calculated?

Accepted Answer

A)   Cash less selling costs.
B)   Cost basis less cost recovery.
C)   Cash less cost recovery.
D)   Amount realized less adjusted basis.
E)   None of the choices are correct.F) All of the above
G) B) and D)

Question 7

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

Accepted Answer

A)   Sale of machinery held for less than one year.
B)   Sale of machinery held for more than one year and where the gain realized exceeds the accumulated depreciation.
C)   Sale of machinery held for more than one year and where the accumulated depreciation exceeds the gain realized.
D)   Sale of land held for more than one year and where the amount realized exceeds the adjusted basis.
E)   None of the choices are correct.F) All of the above
G) B) and D)

Question 8

Which of the following sections does not recapture or recharacterize a taxpayer's gain?

Accepted Answer

A)   §1239.
B)   §1250.
C)   §1245.
D)   §291.
E)   None of the choices are correct.F) A) and D)
G) None of the above

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Why does §1250 recapture generally no longer apply?

Accepted Answer

A)   Congress repealed the code section.
B)   The Tax Reform Act of 1986 changed the depreciation of real property to the straight-line method.
C)   §1245 recapture trumps §1250 recapture.
D)   Because unrecaptured §1250 gains now apply to all taxpayers instead.
E)   None of the choices are correct.F) A) and B)
G) A) and C)

Question 11

Andrea sold a piece of machinery she used in her business for 9 months.The amount realized was $50,000 and the adjusted basis was $55,000.What is Andrea's gain or loss realized and what is the character of the gain or loss?

Accepted Answer

$5,000 ordinary loss.
The real...

Question 12

Arlington LLC traded machinery used in its business to a machinery dealer for some new machinery.Arlington originally purchased the machinery for $60,000 and it had an adjusted basis of $28,000 at the time of the exchange.The new machinery had a fair market value of $35,000.Arlington also received $2,000 of office equipment in the transaction.What is Arlington's gain or loss recognized on the exchange?

Accepted Answer

A)   $0.
B)   $2,000.
C)   $7,000.
D)   $9,000.
E)   None of the choices are correct.F) A) and B)
G) C) and D)

Question 13

Each of the following is true except for:

Accepted Answer

A)   A direct involuntary conversion occurs when property taken under imminent 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.F) A) and B)
G) C) and D)

Question 14

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.F) B) and D)
G) A) and E)

Question 15

Odintz traded machinery for machinery.Odintz originally purchased its machine for $150,000 and the adjusted basis was $90,000 at the time of the exchange.The machinery received was purchased for $200,000,had an adjusted basis of $155,000 at the time of the exchange,and was subject to a mortgage of $50,000 that was paid off before the transfer.What is Odintz's adjusted basis in the new machinery after the exchange?

Accepted Answer

$90,000.
The exchange qualifie...

Question 16

The §1231 look-back rule recharacterizes §1231 gains if §1231 losses have created ordinary losses in the last 5 years.

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.E) All of the above
F) None of the above

Question 18

The sale of computer equipment used in a trade or business for 9 months results in the following type of gain or loss?

Accepted Answer

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

Question 19

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 20

A loss realized for property destroyed in a hurricane is deferred under the involuntary conversion rules.

Accepted Answer

A) True 
 B)False

Exam 11: Property Dispositions

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?

Correct Answer
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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.

Correct Answer
verified

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

Correct Answer
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Which of the following sections does not recapture or recharacterize a taxpayer's gain?

Correct Answer
verified

The sale of computer equipment used in a trade or business for 9 months results in the following type of gain or loss?

Correct Answer
verified

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

Correct Answer
verified

Andrea sold a piece of machinery she used in her business for 9 months.The amount realized was $50,000 and the adjusted basis was $55,000.What is Andrea's gain or loss realized and what is the character of the gain or loss?

Correct Answer
verified
$5,000 ordinary loss.
The real...
View Answer

A parcel of land is always a capital asset.

Correct Answer
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Which of the following is not true regarding installment sales?

Correct Answer
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Each of the following is true except for:

Correct Answer
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Which of the following is how gain or loss realized is calculated?

Correct Answer
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Why does §1250 recapture generally no longer apply?

Correct Answer
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A loss realized for property destroyed in a hurricane is deferred under the involuntary conversion rules.

Correct Answer
verified

Correct Answer
verified
$90,000.
The exchange qualifie...
View Answer

The §1231 look-back rule recharacterizes §1231 gains if §1231 losses have created ordinary losses in the last 5 years.

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified
$4,000 ordinary income and $1,200 of tax...
View Answer

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?

Correct Answer
verified
$8,571 gain recognized in the current ye...
View Answer

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

Correct Answer
verified

Exam 11: Property Dispositions

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?

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following sections does not recapture or recharacterize a taxpayer's gain?

Correct AnswerverifiedShow Answer

The sale of computer equipment used in a trade or business for 9 months results in the following type of gain or loss?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Andrea sold a piece of machinery she used in her business for 9 months.The amount realized was $50,000 and the adjusted basis was $55,000.What is Andrea's gain or loss realized and what is the character of the gain or loss?

Correct Answerverified$5,000 ordinary loss.The real...View AnswerShow Answer

A parcel of land is always a capital asset.

Correct AnswerverifiedShow Answer

Which of the following is not true regarding installment sales?

Correct AnswerverifiedShow Answer

Each of the following is true except for:

Correct AnswerverifiedShow Answer

Which of the following is how gain or loss realized is calculated?

Correct AnswerverifiedShow Answer

Why does §1250 recapture generally no longer apply?

Correct AnswerverifiedShow Answer

A loss realized for property destroyed in a hurricane is deferred under the involuntary conversion rules.

Correct AnswerverifiedShow Answer

Correct Answerverified$90,000.The exchange qualifie...View AnswerShow Answer

The §1231 look-back rule recharacterizes §1231 gains if §1231 losses have created ordinary losses in the last 5 years.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answerverified$4,000 ordinary income and $1,200 of tax...View AnswerShow Answer

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?

Correct Answerverified$8,571 gain recognized in the current ye...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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$5,000 ordinary loss.
The real...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
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$90,000.
The exchange qualifie...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
$4,000 ordinary income and $1,200 of tax...
View Answer

Correct Answer
verified
$8,571 gain recognized in the current ye...
View Answer

Correct Answer
verified