Question 1

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) B) and C)
G) D) and E)

Question 2

Brandy sold a rental house that she owned for $150,000. Brandy bought the house four years ago for $140,000 and has claimed $25,000 of depreciation expense. What is the amount and character of Brandy's gain or loss?

Accepted Answer

$10,000 §1231 gain and $25,000 unrecaptu...

Question 3

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) All of the above
G) B) and C)

Question 4

Realized gains are recognized unless there is specific exception.

Accepted Answer

A) True 
 B)False

Question 5

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 6

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

Accepted Answer

A)   $3,000 ordinary loss, $0 §1231 loss.
B)   $7,000 ordinary gain, $10,000 §1231 loss.
C)   $7,000 ordinary loss, $4,000 §1231 gain.
D)   $1,000 ordinary gain, $4,000 §1231 loss.
E)   None of the choices are correct.F) A) and B)
G) D) and E)

Question 7

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 8

Which of the following realized gains results in a recognized gain?

Accepted Answer

A)   Farm machinery traded for farm machinery.
B)   Sale to a related party.
C)   Involuntary conversion.
D)   Iowa cropland exchanged for a Minnesota warehouse.E) A) and B)
F) A) and C)

Question 9

The gain or loss realized on the sale of an asset is the amount realized less the adjusted basis.

Accepted Answer

A) True 
 B)False

Question 10

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) B) and E)
G) C) and D)

Question 11

The sale of land held for investment 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) A) and B)
G) A) and C) A

Question 12

In the current year, Raven sold machinery with a fair market value of $200,000. The machinery's original basis was $190,000 and Raven's accumulated depreciation on the machinery was $40,000, so its adjusted basis to Raven was $150,000. Raven received $50,000 in the current year and a note paying Raven $75,000 a year for two years beginning in next year. What is the amount and character of the gain that Raven will recognize in the current year?

Accepted Answer

$42,500 gain recognized: $40,000 ordinar...

Question 13

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

Question 14

Butte sold a machine to a machine dealer for $50,000. Butte bought the machine for $55,000 several years ago and has claimed $12,500 of depreciation expense on the machine. What is the amount and character of Butte's gain or loss?

Accepted Answer

A)   $7,500 §1231 loss.
B)   $5,000 §1231 loss.
C)   $7,500 ordinary gain.
D)   $7,500 capital gain.
E)   None of the choices are correct.F) All of the above
G) B) and D)

Question 15

Unrecaptured §1250 gain is taxed at a maximum rate of 25 percent.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is True regarding depreciation recapture?

Accepted Answer

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

Question 17

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

Accepted Answer

A)   Sale of a machine at a gain.
B)   Sale of stock held for investment.
C)   Sale of a §1231 asset.
D)   Sale of inventory.
E)   None of the choices are correct.F) None of the above
G) B) and C)

Question 18

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

Accepted Answer

A)   To facilitate finding replacement property.
B)   To help acquire the replacement property.
C)   To prevent the seller from receiving cash (boot)  that will taint the transaction.
D)   To certify the taxpayer's Form 8824.
E)   All of the choices are correct.F) A) and E)
G) A) and B)

Question 19

Sarah sold 1,000 shares of stock to her brother, David, for $18,000 more than a year ago. Sarah had purchased the stock for $20,000 several years earlier. What is the amount and character of David's recognized gain or loss in the current year if he sells the stock for $15,000 and $25,000, respectively?

Accepted Answer

$3,000 long-term capital loss if sold fo...

Question 20

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

Accepted Answer

A) True 
 B)False  True

Exam 3: Property Dispositions

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

Correct Answer
verified

Brandy sold a rental house that she owned for $150,000. Brandy bought the house four years ago for $140,000 and has claimed $25,000 of depreciation expense. What is the amount and character of Brandy's gain or loss?

Correct Answer
verified
$10,000 §1231 gain and $25,000 unrecaptu...
View Answer

Which of the following is not True regarding installment sales?

Correct Answer
verified

Realized gains are recognized unless there is specific exception.

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

Correct Answer
verified

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

Correct Answer
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Which of the following realized gains results in a recognized gain?

Correct Answer
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The gain or loss realized on the sale of an asset is the amount realized less the adjusted basis.

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

Correct Answer
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The sale of land held for investment results in the following type of gain or loss?

Correct Answer
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A

Correct Answer
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$42,500 gain recognized: $40,000 ordinar...
View Answer

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?

Correct Answer
verified
A

Butte sold a machine to a machine dealer for $50,000. Butte bought the machine for $55,000 several years ago and has claimed $12,500 of depreciation expense on the machine. What is the amount and character of Butte's gain or loss?

Correct Answer
verified

Unrecaptured §1250 gain is taxed at a maximum rate of 25 percent.

Correct Answer
verified

Which of the following is True regarding depreciation recapture?

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

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

Correct Answer
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Correct Answer
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$3,000 long-term capital loss if sold fo...
View Answer

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

Correct Answer
verified
True

Exam 3: Property Dispositions

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

Correct AnswerverifiedShow Answer

Brandy sold a rental house that she owned for $150,000. Brandy bought the house four years ago for $140,000 and has claimed $25,000 of depreciation expense. What is the amount and character of Brandy's gain or loss?

Correct Answerverified$10,000 §1231 gain and $25,000 unrecaptu...View AnswerShow Answer

Which of the following is not True regarding installment sales?

Correct AnswerverifiedShow Answer

Realized gains are recognized unless there is specific exception.

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 AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following realized gains results in a recognized gain?

Correct AnswerverifiedShow Answer

The gain or loss realized on the sale of an asset is the amount realized less the adjusted basis.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The sale of land held for investment results in the following type of gain or loss?

Correct AnswerverifiedA

Correct Answerverified$42,500 gain recognized: $40,000 ordinar...View AnswerShow Answer

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?

Correct AnswerverifiedA

Butte sold a machine to a machine dealer for $50,000. Butte bought the machine for $55,000 several years ago and has claimed $12,500 of depreciation expense on the machine. What is the amount and character of Butte's gain or loss?

Correct AnswerverifiedShow Answer

Unrecaptured §1250 gain is taxed at a maximum rate of 25 percent.

Correct AnswerverifiedShow Answer

Which of the following is True regarding depreciation recapture?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answerverified$3,000 long-term capital loss if sold fo...View AnswerShow Answer

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

Correct AnswerverifiedTrue

Correct Answer
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Correct Answer
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$10,000 §1231 gain and $25,000 unrecaptu...
View 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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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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A

Correct Answer
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$42,500 gain recognized: $40,000 ordinar...
View Answer

Correct Answer
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A

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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$3,000 long-term capital loss if sold fo...
View Answer

Correct Answer
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True