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Exam 11: Property Dispositions

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Question 41

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Ashburn reported a $104,875 net §1231 gain in Year 6. Assuming Ashburn reported $52,500 of nonrecaptured §1231 losses during Years 1 to 5, what amount of Ashburn's net §1231 gain for Year 6, if any, is treated as ordinary income?

A) $0.
B) $52,375.
C) $52,500.
D) $104,875.
E) None of the choices are correct.

F) A) and B)
G) A) and D)

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Question 42

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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.

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

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Question 43

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The §1231 look-back rule applies whether there is a net gain or loss.

Silver sold machinerythat it used in its business to Gold, a related entity, for $55,000. Silver bought the equipment a few years ago for $50,000 and has claimed $15,000 of depreciation expense. What is the amount and character of Silver's gain?

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 next year. What is the amount and character of the gain that Raven will recognize in the current year?

Arlington LLC exchanged land used in its business for some new land. Arlington originally purchased the land it exchanged for $28,000. The new land had a fair market value of $35,000. Arlington also received $2,000 of office equipment in the transaction. What is Arlington'srecognized gain or loss on the exchange?

Which of the following is not an involuntary conversion?

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.

Which of the following is true regarding depreciation recapture?

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

In the current year, Raven sold machinery with a fair market value of $200,000. The machinery's original basis was $190,500 and Raven's accumulated depreciation on the machinery was $40,400, so its adjusted basis to Raven was $150,100. Raven received $49,900 in the current year and a note paying Raven $75,050 a year for two years beginning next year. What is the amount and character of the gain that Raven will recognize in the current year?

Sadie sold 11 shares of stock to her brother, George, for $570 16 months ago. Sadie had purchased the stock for $740 two years earlier. If George sells the stock for $910, what are the amount and character of his recognized gain or loss in the current year?

Gainesville LLC sold the following business assets during the current year: (1)machinery, $20,000 cost basis, $4,000 depreciation, $22,000 proceeds; (2)automobile, $15,000 cost basis, $12,000 depreciation, $7,000 proceeds; (3)equipment, $15,000 cost basis, $10,000 depreciation, $4,000 proceeds; (4)computer equipment, $35,000 cost basis, $16,000 depreciation, $15,000 proceeds; (5)Winchester had unrecaptured §1231 losses of $5,000 in the prior five years. What is the amount and character of Winchester's gains and losses before the 1231 netting process?

Arlington LLC exchanged land used in its business for some new land. Arlington originally purchased the land it exchanged for $34,500. The new land had a fair market value of $38,250. Arlington also received $8,500 of office equipment in the transaction. What is Arlington'srecognized gain or loss on the exchange?

Alexandra sold equipment that she uses in her business for $100,000. Alexandra bought the equipment two years ago for $90,000 and has claimed $25,000 of depreciation expense. What is the amount and character of Alexandra's gain or loss?

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

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

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.

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

When do unrecaptured §1250 gains apply?