Exam 14: Property Transactions: Capital Gains and Losses, 1231, and Recapture Provisions

An individual taxpayer has the gains and losses shown below. There are $3,000 of § 1231 lookback losses. What is the net long-term capital gain? Holding Period/Property Character of Gain or Loss Amount 5 years/vacant land \S1231 gain \ 7,000 2 years/business equipment \S1245 gain 3,200 3 years/publicly traded stock Long-term capital gain 890 8 months/publicly traded stock Short-term capital loss (1,870)

Which of the following comparisons is correct?

The chart below describes the § 1231 assets sold by the Ecru Company (a sole proprietorship) this year. Compute the gain or loss from each asset disposition and determine the net § 1231 gain treated as long­term capital gain for the year. Assume there is a § 1231 lookback loss of $4,000. Asset Acquired Sold Cost Deprecintion Sale Price Stamping machine 3/10/10 8/10/2014 \ 40,000 \ 29,736 \ 32,000 Factory building 2/12/07 7/23/2014 80,000 18,038 90,000 Tractor 5/16/09 11/13/2014 52,000 52,000 30,000 Overhead crane 1/1/2/03 2/25/2014 74,000 74,000 18,000

Seamus had $16,000 of net short-term capital loss in 2013. In 2014, Seamus has $17,000 of long-term capital loss and $26,000 of long-term capital gain. Which of the following statements is correct?

A franchisor licenses its mode of business operation to a franchisee.

Copper Corporation sold machinery for $47,000 on December 31, 2014. The machinery had been purchased on January 2, 2011, for $60,000 and had an adjusted basis of $41,000 at the date of the sale. For 2014, what should Copper Corporation report?

Property sold to a related party purchaser that is depreciable by the purchaser may cause the seller to have ordinary gain.

Harold is a head of household, has $27,000 of taxable income in 2014 from non-capital gain or loss sources, and has the following capital gains and losses: 28 \% long-term capital gain \4 ,300 28\% long-term capital loss (2,000) 0\%/15\%/20\% long-term capital gain 19,000 Short-term capital loss (1,700) What is Harold's taxable income and the tax on that taxable income?

The maximum § 1245 depreciation recapture generally equals the accumulated depreciation.

If the holder of an option fails to exercise the option, the lapse of the option is considered a sale or exchange on the option expiration date.

When an individual taxpayer has a net long-term capital gain that includes both 28% gain and 0%/15%/20% gain, which of these gains will be taxed first when the alternative tax on net long-term capital gain method is used and what difference does it make?

A business taxpayer sells inventory for $80,000. The adjusted basis of the property is $58,000 at the time of the sale and the inventory had been held more than one year. The taxpayer has:

The following assets in Jack's business were sold in 2014: Asset Holding Period Gain/(Loss) Office Equipment 6 years \ 1,100 Automobile 8 months (\ 800) ABC Stock (capital asset) 2 years \ 1,400 The office equipment had a zero adjusted basis and was purchased for $8,000. The automobile was purchased for $2,000 and sold for $1,200. The ABC stock was purchased for $1,800 and sold for $3,200. In 2014 (the year of sale), Jack should report what amount of net capital gain and net ordinary income?

In the "General Procedure for § 1231 Computation: Step 2. § 1231 Netting," if the gains exceed the losses, the net gain is offset by the "lookback" nonrecaptured § 1231 losses.

The holding period of property given up in a like-kind exchange includes the holding period of the asset received if the property that has been exchanged is a capital asset.

Short-term capital losses are netted against long-term capital gains and long-term capital losses are netted against short-term capital gains.

A personal use property casualty loss is generally deductible only to the extent it exceeds 10% of AGI.

Vanna owned an office building that had been held more than one year when it was sold for $567,000. The real estate had an adjusted basis of $45,000 for the land and $233,000 for the building. Straight-line depreciation of $162,000 had been taken on the building. What is the amount and initial character of the gain or loss from disposition of the real estate? Is any of the gain unrecaptured § 1250 (25%) gain?

Which of the following events causes the purchaser of an option to add the cost of the option to the basis of the property to which the option relates?

Judith (now 37 years old) owns a collection of porcelain dolls that she acquired when she was a grade schooler. She had forgotten about them until her mother sent them to her. Her mother had discovered them in a box in her attic while she was cleaning out her house before selling it. Judith had originally acquired all the dolls as gifts from her parents, so she has no way to establish a basis for the dolls. Using information from the Internet, she prepares a careful inventory of the dolls that includes their name, when they were first available for sale, their current value, and other pertinent information. She then lists them for sale on the Internet. To her surprise, she quickly gets an offer of $5,000 for all of them and sells them. Judith has no other gain or loss transactions for the year and is in the 28% marginal tax bracket. What issues do these facts create?