Question 1

Sec.1245 applies to gains on the sale of depreciable personal property,but it generally does not apply to depreciable real property.

Accepted Answer

A) True 
 B)False

Question 2

Trena LLC,a tax partnership owned equally by Trent and Nina,sells a building it had placed in service five years ago.Sec.291 will require that part of the gain (up to 20% of accumulated depreciation)be treated as ordinary gain,with the balance treated as Sec.1231 gain.

Accepted Answer

A) True 
 B)False

Question 3

For livestock to be considered Section 1231 property,

Accepted Answer

A) the livestock must be held for draft,breeding or dairy purposes,but not for sport. 
B) cattle and horses must be held for at least 12 months from the date of acquisition. 
C) cattle and horses must be held for at least 24 months from the date of acquisition. 
D) livestock other than cattle and horses must be held for at least 24 months from the date of acquisition. 
A) the livestock must be held for draft,breeding or dairy purposes,but not for sport. 
B) cattle and horses must be held for at least 12 months from the date of acquisition. 
C) cattle and horses must be held for at least 24 months from the date of acquisition. 
D) livestock other than cattle and horses must be held for at least 24 months from the date of acquisition.

Question 4

If the accumulated depreciation on business equipment held longer than one year exceeds realized gain on the sale of the equipment,all of the realized gain will be treated as Sec.1231 gain.

Accepted Answer

A) True 
 B)False

Question 5

Sec.1245 ordinary income recapture can apply to buildings placed in service prior to 1987.

Accepted Answer

A) True 
 B)False

Question 6

A taxpayer purchased a factory building in 1985 for $800,000.After claiming ACRS-accelerated depreciation of $800,000,she sells the asset for $1,000,000 during the current year.No payment is received during the current year,and the $1,000,000 balance to be paid with interest at the interest rate in four annual payments beginning one year from date of sale.The installment sales method is adopted.How much ordinary income is recognized in the current year?

Accepted Answer

A) $ 0 
B) $200,000 
C) $800,000 
D) $1,000,000 
A) $ 0 
B) $200,000 
C) $800,000 
D) $1,000,000

Question 7

Describe the tax treatment for a noncorporate taxpayer in the 39.6% marginal tax bracket who sells each of the first two assets for $500,000 and each of the second two assets for $750,000.Each asset was purchased in 2011 and is used in a trade or business.There are no other gains and losses and no nonrecaptured Section 1231 losses.

Accepted Answer

• Land: $150,000 Section 1231 gain taxed

Question 8

A corporation owns many acres of timber,which it acquired three years ago,and which has a $150,000 basis for depletion.The timber is cut during the current year for use in the corporation's business.The FMV of the timber on the first day of the current year is $280,000.If the corporation makes the appropriate election,the tax result is

Accepted Answer

A) recognition of a Sec.1231 gain of $130,000. 
B) no recognition of gain or loss since the timber is used in the business. 
C) recognition of a gain at the time of sale if the timber is later sold with the gain equal to the sales price less the basis in the timber. 
D) recognition of a gain if the timber is later sold with the gain equal to the sales price less $280,000 (FMV on the first day of the year of the cutting). 
A) recognition of a Sec.1231 gain of $130,000. 
B) no recognition of gain or loss since the timber is used in the business. 
C) recognition of a gain at the time of sale if the timber is later sold with the gain equal to the sales price less the basis in the timber. 
D) recognition of a gain if the timber is later sold with the gain equal to the sales price less $280,000 (FMV on the first day of the year of the cutting).

Question 9

In addition to the normal recapture rules of Sec.1250,corporations which sell depreciable real estate are subject to additional recapture rules of Sec.291.

Accepted Answer

A) True 
 B)False

Sec.1245 applies to gains on the sale of depreciable personal property,but it generally does not apply to depreciable real property.

Trena LLC,a tax partnership owned equally by Trent and Nina,sells a building it had placed in service five years ago.Sec.291 will require that part of the gain (up to 20% of accumulated depreciation)be treated as ordinary gain,with the balance treated as Sec.1231 gain.

For livestock to be considered Section 1231 property,

If the accumulated depreciation on business equipment held longer than one year exceeds realized gain on the sale of the equipment,all of the realized gain will be treated as Sec.1231 gain.

Sec.1245 ordinary income recapture can apply to buildings placed in service prior to 1987.

In addition to the normal recapture rules of Sec.1250,corporations which sell depreciable real estate are subject to additional recapture rules of Sec.291.

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 applies to gains on the sale of depreciable personal property,but it generally does not apply to depreciable real property.

Trena LLC,a tax partnership owned equally by Trent and Nina,sells a building it had placed in service five years ago.Sec.291 will require that part of the gain (up to 20% of accumulated depreciation)be treated as ordinary gain,with the balance treated as Sec.1231 gain.

For livestock to be considered Section 1231 property,

If the accumulated depreciation on business equipment held longer than one year exceeds realized gain on the sale of the equipment,all of the realized gain will be treated as Sec.1231 gain.

Sec.1245 ordinary income recapture can apply to buildings placed in service prior to 1987.

In addition to the normal recapture rules of Sec.1250,corporations which sell depreciable real estate are subject to additional recapture rules of Sec.291.

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