Exam 7: Property Dispositions

When does an asset have a substituted basis?

Individuals can only deduct capital losses to the extent of capital gains plus $3,000.

A personal residence owned by an individual is a capital asset.

Jason sells a piece of equipment for $43,000.The equipment was purchased four years ago for $56,000.It was depreciated using an accelerated method of depreciation.Its adjusted basis at the time of sale is $21,000.Straight-line depreciation would have been only $20,000.What is the amount and type of gain Jordan recognizes on this sale?

Bobsy Company has a $14,000 net Section 1231 gain for the current tax year from its only property transaction.In the previous year,it had a $7,000 net Section 1231 loss.For the current year,the net Section 1231 gain will be taxed as:

Cliff owned investment stock purchased three years ago for $16,000 and bonds purchased six months ago for $9,800.When he needed money recently,he sold the stock for $13,800 and the bonds for $10,100.What is the amount and type of net gain or loss that Cliff will include in computing his taxable income?

Nancy sold her Section 1202 stock for $9,000,000 on August 7,2015.She had purchased the stock nine years ago for $1,500,000.She invested $4,500,000 in other qualifying Section 1202 stock.How will Nancy treat the gain on this sale for tax purposes?

A net Section 1231 gain is given the tax-favored treatment of a long-term capital asset.

Vanessa bought 2,000 shares of Glenco stock when the company was first formed for $57,000.The company had $900,000 of total capital when formed and the stock qualified as Section 1244 stock.Vanessa sold the stock three years later for $3,000.If Vanessa is single,how much gain or loss does she have on the sale of the stock and how will it be treated by her?

Melody works in her home using a computer she purchased two years ago for $2,500.The total adjusted basis for the computer is now $1,000.Her husband and children used the computer 20 percent of the time to play computer games and for personal correspondence.She sells the computer for $1,200.How much and what kind of gain does Melody recognize?

All assets owned by a trade or business are Section 1231 assets.

What is depreciation recapture?

Alpha Corporation had income from operations of $30,000.What is the corporation's taxable income including the following property transactions: Gain on investment stock held for two years = $8,000; loss on machinery held three years = $6,000; $4,000 loss on equipment held 10 months; $4,000 gain on land used for six years for storage of trucks.

Why is the character of a gain or loss on a disposition important? What are the three types of recognized gains or losses that determine their taxation?

A gain must be recognized unless some tax provision allows nonrecognition or deferral.

Carol used her auto 60 percent for business and 40 percent for personal use.She purchased it for $10,800 and has taken $3,992 of depreciation on it.What is her recognized gain on a sale for $7,800 and what is it character?

Donza Company has unrecaptured Section 1231 losses from the two previous years totaling $25,000 and a $32,000 Section 1231 gain in the current year.Based on this information,all of the following statements concerning Donza's taxable income for the current year are correct except:

Brent sold his personal car and some household furniture during the year.He had a $3,000 gain on the car but a $5,000 loss on the furniture.What is his recognized gain or loss included in taxable income as a result of these sales?

Corporate net capital gains receive no tax-favored treatment.

Abby has a $10,000 loss on some collectibles,a $5,000 Sec.1202 gain,and an $11,000 gain on some securities.If all gains and losses are long-term and Abby is in the 25 percent tax bracket,how is her net gain taxed?