Question 1

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) C) and D)
F) None of the above

Question 2

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's recognized gain or loss on the exchange?

Accepted Answer

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

Question 3

Which of the following sections recaptures or recharacterizes only corporate taxpayers' gains?

Accepted Answer

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

Question 4

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?

Accepted Answer

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

Question 5

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

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

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) None of the above
G) A) and E)

Question 8

Frederique sold furniture that she uses in her business for $15,000. Frederique bought the furniture a few years ago for $40,000 and has claimed $20,000 of depreciation expense. What is the amount and character of Frederique's gain or loss?

Accepted Answer

$5,000 §1231 loss.
T...

Question 9

Ashburn reported a $105,000 net §1231 gain in Year 6. Assuming Ashburn reported $60,000 of nonrecaptured §1231 losses during Years 1-5, what amount of Ashburn's net §1231 gain for Year 6, if any, is treated as ordinary income?

Accepted Answer

A)  $0.
B)  $45,000.
C)  $60,000.
D)  $105,000.
E)  None of the choices are correct.F) D) and E)
G) C) and D)

Question 10

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 32 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 $1,280 of tax...

Question 11

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

Question 12

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?

Accepted Answer

A)  $25,000 §1231 gain.
B)  $20,000 ordinary gain, and $5,000 §1231 gain.
C)  $5,000 ordinary gain, and $20,000 §1231 gain.
D)  $25,000 capital gain.
E)  None of the choices are correct.F) B) and C)
G) A) and D)

Question 13

Which of the following is not an involuntary conversion?

Accepted Answer

A)  Destruction caused by a hurricane.
B)  Eminent domain.
C)  A foreclosure.
D)  Fire damage.
E)  All of these choices are involuntary conversions.F) B) and E)
G) C) and D)

Question 14

Tyson had a parcel of undeveloped investment land that he wanted to trade for a warehouse to be used in his business. He found a buyer willing to pay him $450,000 for the land. He transferred the land to a third party intermediary on April 1st of the current year. On May 10th, with the help of a commercial real estate agent, Tyson identified two suitable warehouses. On August 10th he made an offer on the first building and was rejected. On August 13th an offer was accepted on the second warehouse. On September 23rd the third party intermediary transferred $500,000 ($450,000 from the original property plus $50,000 from Tyson)to the seller and conveyed title to the warehouse to Tyson. Explain whether the exchange of property qualifies as a like-kind exchange.

Accepted Answer

Yes, the exchange of property qualifies ...

Question 15

Realized gains are recognized unless there is specific exception.

Accepted Answer

A) True 
 B)False

Question 16

Sadie sold 10 shares of stock to her brother, George, for $500 16 months ago. Sadie had purchased the stock for $600 two years earlier. If George sells the stock for $700, what are the amount and character of his recognized gain or loss in the current year?

Accepted Answer

A)  $0.
B)  $100 short-term capital gain.
C)  $100 long-term capital gain.
D)  $200 short-term capital gain.
E)  None of the choices are correct.F) B) and E)
G) B) and D)

Question 17

A parcel of land is always a capital asset.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A)  Sale of a personal use asset.
B)  Sale of inventory.
C)  Gain on equipment used in a trade or business and held for more than one year, if it is the only asset sale during the year.
D)  Sale of capital stock in another company.
E)  None of the choices are correct.F) A) and D)
G) C) and D)

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

Bateman Corporation sold an office building that it used in its business for $800,000. Bateman bought the building 10 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) B) and E)

Exam 11: Property Dispositions

Correct Answer
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$4,000 ordinary income and $1,280 of tax...
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Which of the following sections does not recapture or recharacterize a taxpayer's gain?

Correct Answer
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Which of the following is not an involuntary conversion?

Correct Answer
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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
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Correct Answer
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Ashburn reported a $105,000 net §1231 gain in Year 6. Assuming Ashburn reported $60,000 of nonrecaptured §1231 losses during Years 1-5, what amount of Ashburn's net §1231 gain for Year 6, if any, is treated as ordinary income?

Correct Answer
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Frederique sold furniture that she uses in her business for $15,000. Frederique bought the furniture a few years ago for $40,000 and has claimed $20,000 of depreciation expense. What is the amount and character of Frederique's gain or loss?

Correct Answer
verified
$5,000 §1231 loss.
T...
View Answer

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?

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

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

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

Correct Answer
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A parcel of land is always a capital asset.

Correct Answer
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Realized gains are recognized unless there is specific exception.

Correct Answer
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Correct Answer
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Yes, the exchange of property qualifies ...
View Answer

Which of the following sections recaptures or recharacterizes only corporate taxpayers' gains?

Correct Answer
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Which of the following does not ultimately result in a capital gain or loss?

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

Correct Answer
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Sadie sold 10 shares of stock to her brother, George, for $500 16 months ago. Sadie had purchased the stock for $600 two years earlier. If George sells the stock for $700, what are the amount and character of his recognized gain or loss in the current year?

Correct Answer
verified

Bateman Corporation sold an office building that it used in its business for $800,000. Bateman bought the building 10 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

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

Correct Answer
verified

Exam 11: Property Dispositions

Correct Answerverified$4,000 ordinary income and $1,280 of tax...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is not an involuntary conversion?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Ashburn reported a $105,000 net §1231 gain in Year 6. Assuming Ashburn reported $60,000 of nonrecaptured §1231 losses during Years 1-5, what amount of Ashburn's net §1231 gain for Year 6, if any, is treated as ordinary income?

Correct AnswerverifiedShow Answer

Frederique sold furniture that she uses in her business for $15,000. Frederique bought the furniture a few years ago for $40,000 and has claimed $20,000 of depreciation expense. What is the amount and character of Frederique's gain or loss?

Correct Answerverified$5,000 §1231 loss.T...View AnswerShow Answer

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?

Correct AnswerverifiedShow Answer

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

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A parcel of land is always a capital asset.

Correct AnswerverifiedShow Answer

Realized gains are recognized unless there is specific exception.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedYes, the exchange of property qualifies ...View AnswerShow Answer

Which of the following sections recaptures or recharacterizes only corporate taxpayers' gains?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Sadie sold 10 shares of stock to her brother, George, for $500 16 months ago. Sadie had purchased the stock for $600 two years earlier. If George sells the stock for $700, what are the amount and character of his recognized gain or loss in the current year?

Correct AnswerverifiedShow Answer

Bateman Corporation sold an office building that it used in its business for $800,000. Bateman bought the building 10 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 AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
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$4,000 ordinary income and $1,280 of tax...
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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$5,000 §1231 loss.
T...
View Answer

Correct Answer
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Correct Answer
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$42,500 gain recognized: $40,000 ordinar...
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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Yes, the exchange of property qualifies ...
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Correct Answer
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