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Exam 10: Property Dispositions

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Question 1

Multiple Choice

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Which of the following is not a §1245 asset if held for more than one year?

A) Machinery.
B) Automobile.
C) Business cell phone.
D) Land.
E) None of the choices are correct.

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

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D

Question 2

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

A) True
B) False

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Question 3

Multiple Choice

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

Which of the following is true regarding disallowed losses between related taxpayers?

Peroni Corporation sold a parcel of land valued at $300,000.Its basis in the land was $250,000.For the land,Peroni received $150,000 in cash in the current year and a note providing Peroni with $150,000 in the subsequent year.What is Peroni's recognized gain in the current and subsequent year,respectively?

Brandon,an individual,began business four years ago and has sold §1231 assets with $5,000 of losses within the last 5 years.Brandon owned each of the assets for several years.In the current year,Brandon sold the following business assets: $\begin{array}{lccc}&&\text { Accumulated }\\\text {Asset}&\text { Original Cost } & \text { Depreciation } & {\text { Gain/Loss }} \\\text {Machinery}&\$ 30,000& \$7,000 & \$ 10,000 \\\text {Land}&40,000 & 0 & 20,000 \\\text {Building}&90,000 & 20000 & (5,000) \end{array}$ 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.

Alpha sold machinery,which it used in its business,to Beta,a related entity,for $40,000.Beta used the machinery in its business.Alpha bought the machinery a few years ago for $50,000 and has claimed $30,000 of depreciation expense.What is the amount and character of Alpha's gain?

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

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

Collins Corporation,of Camden,Maine,wants to exchange its manufacturing facility for Rockland Company's building.Both parties agree that Collins's facility is worth $200,000 and that Rockland's building is worth $175,000.Collins will not enter into the transaction unless it qualifies as a like-kind exchange.If Collins wants to avoid gain,what could the parties do to equalize the value exchanged but still allow the exchange to qualify as a like-kind exchange?

Why does §1250 recapture generally no longer apply?

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

Each of the following is true except for:

An installment sale is any sale where at least a portion of the sales proceeds is received in a subsequent taxable year.

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?

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

Jessie sold a piece of land held for investment for $250,000.Jessie bought the land two years ago for $195,000.What is the amount and character of Jessie's gain?

When does unrecaptured §1250 gains apply?

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

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?