Question 1

Sec.1245 can increase the amount of gain recognized on an asset.

Accepted Answer

A) True 
 B)False  False

Question 2

Hilton,a single taxpayer in the 28% marginal tax bracket,has $16,000 of nonrecaptured net Sec.1231 losses,at the beginning of a year in which he had the following transactions:
-Sale of Asset A at a $10,000 1231 gain,all of which is unrecaptured Sec.1250 gain
-Sale of Asset B at a $13,000 1231 gain
How are the items reported this year and at which rate(s)are the amounts taxed?

Accepted Answer

Asset A- The entire gain from the sale of Asset A is ordinary income due to the five-year lookback.The full $10,000 gain will be taxed at 28%.Asset B- As a result of the five-year lookback rule,$6,000 of the gain on the sale of Asset B is ordinary income ($16,000 nonrecaptured losses less $10,000 ordinary income on sale of asset A)taxed at 28%; the remaining $7,000 1231 gain is taxed at 15%

Question 3

An unincorporated business sold two warehouses during the current year.The straight-line depreciation method was used for the first building and the accelerated method (ACRS)was used for the second building.Information about those buildings is presented below.   How much gain from these sales should be reported as section 1231 gain and ordinary income due to depreciation recapture by the owner of the business?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)    B

Question 4

Pam owns a building used in her trade or business that was placed into service in 2002.The building cost $450,000 and depreciation to date amounts to $200,000.Pam sells the building for $380,000.It is the only asset she sells this year,and she has no nonrecaptured Sec.1231 losses.What is the amount of recognized gain and the nature of the gain? How will the gain be taxed?

Accepted Answer

@#IMG-DLM& The entire gain is Sec.1231 gain taxed

Question 5

Maura makes a gift of a van to a local food bank run by a charity.Maura had used the van in her trade or business.The van has a FMV of $6,500; a cost of $31,000; and $27,000 depreciation claimed.What is the amount of Maura's charitable contribution deduction?

Accepted Answer

A) $6,500 
B) $31,000 
C) $4,000 
D) $2,500 
A) $6,500 
B) $31,000 
C) $4,000 
D) $2,500

Question 6

Gains and losses resulting from condemnations of Sec.1231 property and capital assets held more than one year are classified as ordinary gains and losses.

Accepted Answer

A) True 
 B)False

Question 7

Frisco Inc.,a C corporation,placed a building in service in 2002 and deducted straight-line depreciation under the MACRS system in the normal manner.It sold the building this year for a substantial gain.Because straight-line depreciation was used,Frisco will not need to recognize any ordinary gain.

Accepted Answer

A) True 
 B)False

Question 8

Lucy,a noncorporate taxpayer,experienced the following Section 1231 gains and losses during the years 2010 through 2015.Her first disposition of a Sec.1231 asset occurred in 2010.Assuming Lucy had no capital gains and losses during that time period,what is the tax treatment in each of the years listed?

Accepted Answer

The answer of Lucy,a noncorporate taxpayer,experienced the following Section 1231...

Question 9

The following gains and losses pertain to Arnold's business assets that qualify as Sec.1231 property.Arnold does not have any nonrecaptured net Sec.1231 losses from previous years,and the portion of gain recaptured as ordinary income due to the depreciation recapture provisions has been eliminated.   Describe the specific tax treatment of each of these transactions.

Accepted Answer

The $25,000 casualty loss is an ordinary

Question 10

Marta purchased residential rental property for $600,000 on January 1,1985.Total ACRS deductions for 1985 through the date of sale amounted to $600,000.If the straight-line method of depreciation had been used,depreciation would have been $600,000.The property is sold for $750,000 on January 1 of the current year.The amount and character of the gain is

Accepted Answer

A) $750,000 Sec.1231 gain. 
B) $150,000 Sec.1231 gain and $600,000 ordinary income. 
C) $750,000 ordinary gain due to Sec 1245. 
D) $750,000 ordinary gain due to Sec.1250. 
A) $750,000 Sec.1231 gain. 
B) $150,000 Sec.1231 gain and $600,000 ordinary income. 
C) $750,000 ordinary gain due to Sec 1245. 
D) $750,000 ordinary gain due to Sec.1250.

Question 11

Costs of tangible personal business property which are expensed under Sec.179 are subject to recapture if the property is converted to nonbusiness use before the end of the MACRS recovery period.

Accepted Answer

A) True 
 B)False

Question 12

Melissa acquired oil and gas properties for $600,000.During 2014 she elected to expense the $180,000 of IDC.Total depletion allowed was $50,000.During the current year,Melissa sells the property for $700,000.
a.What is the amount of and nature of her gain using the facts above?
b.What is the amount of and nature of her gain assuming that she sold the property for $850,000?

Accepted Answer

a.Melissa has realized gain of $150,000

Question 13

Octet Corporation placed a small storage building in service in 2000.Octet's original cost for the building is $800,000 and the cost recovery deductions are $300,000.This year the building is sold for $1,100,000.The amount and character of the gain are

Accepted Answer

A) Ordinary gain of $60,000 and Sec.1231 gain of $540,000. 
B) Ordinary gain of $300,000 and Sec.1231 gain of $300,000. 
C) Ordinary gain of $600,000. 
D) Sec.1231 gain of $600,000. 
A) Ordinary gain of $60,000 and Sec.1231 gain of $540,000. 
B) Ordinary gain of $300,000 and Sec.1231 gain of $300,000. 
C) Ordinary gain of $600,000. 
D) Sec.1231 gain of $600,000.

Question 14

Blair,whose tax rate is 28%,sells one tract of land at a gain of $29,000 and another tract of land at a gain of $11,000.Both tracts of land are Sec.1231 property.She has never had any other Sec.1231 transactions.How are the gains taxed?

Accepted Answer

A) ordinary income of $40,000 taxed at 28% 
B) a net capital gain of $40,000 which is not taxed 
C) a net capital gain of $40,000 taxed at 15% 
D) ordinary income of $40,000 taxed at 25% 
A) ordinary income of $40,000 taxed at 28% 
B) a net capital gain of $40,000 which is not taxed 
C) a net capital gain of $40,000 taxed at 15% 
D) ordinary income of $40,000 taxed at 25%

Question 15

All of the following statements are true regarding Sec.1245 are true except

Accepted Answer

A) Sec.1245 does not apply to any buildings placed in service after 1986. 
B) Sec.1245 applies to assets sold or exchanged at a gain or at a loss. 
C) Sec.1245 property includes nonresidential real estate that qualified as recovery property under the ACRS rules unless the taxpayer elected to use the straight-line method of cost recovery. 
D) Sec.1245 ordinary gain treatment applies to total depreciation or amortization allowed or allowable but not more than the realized gain. 
A) Sec.1245 does not apply to any buildings placed in service after 1986. 
B) Sec.1245 applies to assets sold or exchanged at a gain or at a loss. 
C) Sec.1245 property includes nonresidential real estate that qualified as recovery property under the ACRS rules unless the taxpayer elected to use the straight-line method of cost recovery. 
D) Sec.1245 ordinary gain treatment applies to total depreciation or amortization allowed or allowable but not more than the realized gain.

Question 16

Ross purchased a building in 1985,which he uses in his manufacturing business.Ross uses the ACRS statutory rates to determine the cost-recovery deduction for the building.Ross's original cost for the building is $500,000 and cost-recovery deductions allowed are $500,000.If the building is sold for $340,000,the tax results to Ross are

Accepted Answer

A) $340,000 LTCG. 
B) $340,000 Sec.1231 gain. 
C) $340,000 Sec.1245 ordinary income. 
D) $340,000 Sec.1250 ordinary income. 
A) $340,000 LTCG. 
B) $340,000 Sec.1231 gain. 
C) $340,000 Sec.1245 ordinary income. 
D) $340,000 Sec.1250 ordinary income.

Question 17

For noncorporate taxpayers,depreciation recapture is not required on real property placed in service after 1986.

Accepted Answer

A) True 
 B)False

Question 18

A corporation owns many acres of timber,which it acquired three years ago,and which has a $120,000 basis.The timber was cut last year for use in the corporation's business.The FMV of the timber on the first day of last year was $270,000.The corporation made the appropriate election to treat the cutting as a sale or exchange.The timber is sold for $300,000 this year.The tax result this year is

Accepted Answer

A) recognition of capital gain of $30,000. 
B) recognition of Sec.1231 gain of $30,000. 
C) recognition of ordinary income of $30,000. 
D) no income recognized since all recognition occurs in the year of the cutting of the timber. 
A) recognition of capital gain of $30,000. 
B) recognition of Sec.1231 gain of $30,000. 
C) recognition of ordinary income of $30,000. 
D) no income recognized since all recognition occurs in the year of the cutting of the timber.

Question 19

With respect to residential rental property

Accepted Answer

A) 80% or more of the gross rental income from the building or structure must be rental income from dwelling units in order for it to be classified as residential rental property. 
B) hotels are not included in this category if less than half of the units are used on a transient basis. 
C) 80% or more of the net rental income from the building or structure must be rental income from dwelling units in order for it to be classified as residential rental property. 
D) gain is not subject to the depreciation recapture provisions if the property is held more than one year. 
A) 80% or more of the gross rental income from the building or structure must be rental income from dwelling units in order for it to be classified as residential rental property. 
B) hotels are not included in this category if less than half of the units are used on a transient basis. 
C) 80% or more of the net rental income from the building or structure must be rental income from dwelling units in order for it to be classified as residential rental property. 
D) gain is not subject to the depreciation recapture provisions if the property is held more than one year.

Question 20

Yelenis,whose tax rate is 28%,sells one Sec.1231 asset this year,resulting in a $50,000 gain.Included in the $50,000 Sec.1231 gain is $30,000 of unrecaptured Sec.1250 gain.A review of Yelenis tax files for the past five years indicates one prior Sec.1231 sale which resulted in a $14,000 loss.The gain will be taxed as

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Sec.1245 can increase the amount of gain recognized on an asset.

Maura makes a gift of a van to a local food bank run by a charity.Maura had used the van in her trade or business.The van has a FMV of $6,500; a cost of $31,000; and $27,000 depreciation claimed.What is the amount of Maura's charitable contribution deduction?

Gains and losses resulting from condemnations of Sec.1231 property and capital assets held more than one year are classified as ordinary gains and losses.

Frisco Inc.,a C corporation,placed a building in service in 2002 and deducted straight-line depreciation under the MACRS system in the normal manner.It sold the building this year for a substantial gain.Because straight-line depreciation was used,Frisco will not need to recognize any ordinary gain.

Costs of tangible personal business property which are expensed under Sec.179 are subject to recapture if the property is converted to nonbusiness use before the end of the MACRS recovery period.

Octet Corporation placed a small storage building in service in 2000.Octet's original cost for the building is $800,000 and the cost recovery deductions are $300,000.This year the building is sold for $1,100,000.The amount and character of the gain are

Blair,whose tax rate is 28%,sells one tract of land at a gain of $29,000 and another tract of land at a gain of $11,000.Both tracts of land are Sec.1231 property.She has never had any other Sec.1231 transactions.How are the gains taxed?

All of the following statements are true regarding Sec.1245 are true except

For noncorporate taxpayers,depreciation recapture is not required on real property placed in service after 1986.

With respect to residential rental property

Tax Research

an Introduction to Taxation

Corporate Formations and Capital Structure

Determination of Tax

The Corporate Income Tax

Gross Income: Inclusions

Corporate Nonliquidating Distributions

Gross Income: Exclusions

Other Corporate Tax Levies

Property Transactions: Capital Gains and Losses

Corporate Liquidating Distributions

Deductions and Losses

Corporate Acquisitions and Reorganizations

Itemized Deductions

Consolidated Tax Returns

Losses and Bad Debts

Partnership Formation and Operation

Employee Expenses and Deferred Compensation

Special Partnership Issues

Depreciation,cost Recovery,amortization,and Depletion

Corporations

Accounting Periods and Methods

The Gift Tax

Property Transactions: Nontaxable Exchanges

The Estate Tax

Income Taxation of Trusts and Estates

Special Tax Computation Methods,tax Credits,and Payment of Tax

Administrative Procedures

Filters

Exam 26: Property Transactions: Section 1231 and Recapture

Sec.1245 can increase the amount of gain recognized on an asset.

Maura makes a gift of a van to a local food bank run by a charity.Maura had used the van in her trade or business.The van has a FMV of $6,500; a cost of $31,000; and $27,000 depreciation claimed.What is the amount of Maura's charitable contribution deduction?

Gains and losses resulting from condemnations of Sec.1231 property and capital assets held more than one year are classified as ordinary gains and losses.

Frisco Inc.,a C corporation,placed a building in service in 2002 and deducted straight-line depreciation under the MACRS system in the normal manner.It sold the building this year for a substantial gain.Because straight-line depreciation was used,Frisco will not need to recognize any ordinary gain.

Costs of tangible personal business property which are expensed under Sec.179 are subject to recapture if the property is converted to nonbusiness use before the end of the MACRS recovery period.

Octet Corporation placed a small storage building in service in 2000.Octet's original cost for the building is $800,000 and the cost recovery deductions are $300,000.This year the building is sold for $1,100,000.The amount and character of the gain are

Blair,whose tax rate is 28%,sells one tract of land at a gain of $29,000 and another tract of land at a gain of $11,000.Both tracts of land are Sec.1231 property.She has never had any other Sec.1231 transactions.How are the gains taxed?

All of the following statements are true regarding Sec.1245 are true except

For noncorporate taxpayers,depreciation recapture is not required on real property placed in service after 1986.

With respect to residential rental property

Tax Research

an Introduction to Taxation

Corporate Formations and Capital Structure

Determination of Tax

The Corporate Income Tax

Gross Income: Inclusions

Corporate Nonliquidating Distributions

Gross Income: Exclusions

Other Corporate Tax Levies

Property Transactions: Capital Gains and Losses

Corporate Liquidating Distributions

Deductions and Losses

Corporate Acquisitions and Reorganizations

Itemized Deductions

Consolidated Tax Returns

Losses and Bad Debts

Partnership Formation and Operation

Employee Expenses and Deferred Compensation

Special Partnership Issues

Depreciation,cost Recovery,amortization,and Depletion

Corporations

Accounting Periods and Methods

The Gift Tax

Property Transactions: Nontaxable Exchanges

The Estate Tax

Income Taxation of Trusts and Estates

Special Tax Computation Methods,tax Credits,and Payment of Tax

Administrative Procedures

Filters