Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

The following are gains and losses recognized in 2015 on Ann's business assets that were held for more than one year. The assets qualify as Sec. 1231 property.   A summary of Ann's net Sec. 1231 gains and losses for the previous five-year period is as follows:   Describe the specific tax treatment of each of the current year transactions.

Accepted Answer

The $20,000 gain from the casualty is tr

Question 3

Any gain or loss resulting from the sale or disposition of depreciable property used in trade or business and held one year or less is considered ordinary.

Accepted Answer

A) True 
 B)False

Question 4

During the current year, a corporation sells equipment for $300,000. The equipment cost $270,000 when purchased and placed in service two years ago and $60,000 of depreciation deductions were allowed. The results of the sale are

Accepted Answer

A)  ordinary income of $90,000. 
B)  Sec. 1231 gain of $90,000. 
C)  ordinary income of $60,000 and LTCG of $30,000. 
D)  ordinary income of $60,000 and Sec. 1231 gain of $30,000. 
A)  ordinary income of $90,000. 
B)  Sec. 1231 gain of $90,000. 
C)  ordinary income of $60,000 and LTCG of $30,000. 
D)  ordinary income of $60,000 and Sec. 1231 gain of $30,000.

Question 5

Network Corporation purchased $200,000 of five-year equipment on March 24, 2014. They elected to expense $60,000 of the cost under Sec. 179 in effect that year. After depreciating the equipment $28,000 in 2014 and $22,400 in 2015, the equipment was sold for $190,000.
a. What is the amount of the realized gain (or loss) on the sale?
b. How is the gain or loss taxed?

Accepted Answer

a. The realized gain is $100,4

Question 6

Sec. 1250 requires a portion of gain realized on the sale of a buildings used in a business and depreciated under MACRS to be recaptured as ordinary gain.

Accepted Answer

A) True 
 B)False

Question 7

Section 1250 does not apply to assets sold or exchanged at a loss.

Accepted Answer

A) True 
 B)False

Question 8

Clarise bought a building three years ago for $180,000 to use in her business. The straight-line method of depreciation was used and $15,000 of depreciation deductions were allowed. During the current year, Clarise sells the building to her wholly-owned corporation for $235,000. The tax results to Clarise are

Accepted Answer

A)  $70,000 ordinary income. 
B)  $70,000 of Sec. 1231 gain. 
C)  $55,000 ordinary income and $15,000 Sec. 1231 gain. 
D)  $15,000 of ordinary income and $55,000 Sec. 1231 gain. 
A)  $70,000 ordinary income. 
B)  $70,000 of Sec. 1231 gain. 
C)  $55,000 ordinary income and $15,000 Sec. 1231 gain. 
D)  $15,000 of ordinary income and $55,000 Sec. 1231 gain.

Question 9

This year Jenna had the gains and losses noted below on property, plant and equipment used in her business. Each asset had been held longer than one year. Jenna has not previously disposed of any business assets.   Jenna will recognize

Accepted Answer

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

Question 10

In 2015, Thomas, who has a marginal tax rate of 15%, sells land that is Sec. 1231 property at a gain of $4,000. If he has no other 1231 transactions or capital asset transactions and has no nonrecaptured 1231 gain, Thomas will pay no tax on the $4,000 gain.

Accepted Answer

A) True 
 B)False

Question 11

In order to be considered Sec. 1231 property, all of the following livestock must be held for 12 months or more from date of acquisition except

Accepted Answer

A)  goats. 
B)  hogs. 
C)  sheep. 
D)  cattle. 
A)  goats. 
B)  hogs. 
C)  sheep. 
D)  cattle.

Question 12

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 13

The following gains and losses pertain to Jimmy's business assets that qualify as Sec. 1231 property. Jimmy 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 $24,000 casualty gain is treated as

Question 14

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 o

Question 15

An unincorporated business sold two warehouses during the current year. The straight-line depreciation method was used for Building No. 1 and the accelerated method (ACRS) was used for Building No. 2. Information about those buildings is presented below.   Accum. Depreciation   How much gain from these sales should be reported as section 1231 gain and ordinary income due to depreciation recapture?

Accepted Answer

Building No. 2 is co

Question 16

Connors Corporation sold a warehouse during the current year for $980,000. The building had been acquired in 1980 at a cost of $830,000. The building is fully depreciated.
What is the amount and nature of the gain or loss on the sale of the warehouse?

Accepted Answer

The answer of Connors Corporation sold a warehouse during the...

Question 17

Which of the following assets is 1231 property?

Accepted Answer

A)  a machine used in the company's manufacturing operations 
B)  an investment in corporate stock 
C)  land held for investment 
D)  items held for resale by a retailer 
A)  a machine used in the company's manufacturing operations 
B)  an investment in corporate stock 
C)  land held for investment 
D)  items held for resale by a retailer

Question 18

Daniel recognizes $35,000 of Sec. 1231 gains and $25,000 of Sec. 1231 losses during the current year. The only other Sec. 1231 item was a $4,000 loss three years ago. This year, Daniel must report

Accepted Answer

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

Question 19

If a taxpayer has gains on Sec. 1231 assets, Secs. 1245 and 1250 must be applied first to determine any amounts recaptured as ordinary income, and any excess gain may then be netted with Sec. 1231 losses for possible long-term capital gain treatment.

Accepted Answer

A) True 
 B)False

Question 20

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.

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

Any gain or loss resulting from the sale or disposition of depreciable property used in trade or business and held one year or less is considered ordinary.

During the current year, a corporation sells equipment for $300,000. The equipment cost $270,000 when purchased and placed in service two years ago and $60,000 of depreciation deductions were allowed. The results of the sale are

Sec. 1250 requires a portion of gain realized on the sale of a buildings used in a business and depreciated under MACRS to be recaptured as ordinary gain.

Section 1250 does not apply to assets sold or exchanged at a loss.

This year Jenna had the gains and losses noted below on property, plant and equipment used in her business. Each asset had been held longer than one year. Jenna has not previously disposed of any business assets. Jenna will recognize

In 2015, Thomas, who has a marginal tax rate of 15%, sells land that is Sec. 1231 property at a gain of $4,000. If he has no other 1231 transactions or capital asset transactions and has no nonrecaptured 1231 gain, Thomas will pay no tax on the $4,000 gain.

In order to be considered Sec. 1231 property, all of the following livestock must be held for 12 months or more from date of acquisition except

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.

Connors Corporation sold a warehouse during the current year for $980,000. The building had been acquired in 1980 at a cost of $830,000. The building is fully depreciated. What is the amount and nature of the gain or loss on the sale of the warehouse?

Which of the following assets is 1231 property?

Daniel recognizes $35,000 of Sec. 1231 gains and $25,000 of Sec. 1231 losses during the current year. The only other Sec. 1231 item was a $4,000 loss three years ago. This year, Daniel must report

If a taxpayer has gains on Sec. 1231 assets, Secs. 1245 and 1250 must be applied first to determine any amounts recaptured as ordinary income, and any excess gain may then be netted with Sec. 1231 losses for possible long-term capital gain treatment.

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

An Introduction to Taxation

Determination of Tax

Gross Income: Inclusions

Gross Income: Exclusions

Property Transactions: Capital Gains and Losses

Deductions and Losses

Itemized Deductions

Losses and Bad Debts

Employee Expenses and Deferred Compensation

Depreciation, Cost Recovery, Amortization, and Depletion

Accounting Periods and Methods

Property Transactions: Nontaxable Exchanges

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

Filters

Exam 13: Property Transactions: Section 1231 and Recapture

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

Any gain or loss resulting from the sale or disposition of depreciable property used in trade or business and held one year or less is considered ordinary.

During the current year, a corporation sells equipment for $300,000. The equipment cost $270,000 when purchased and placed in service two years ago and $60,000 of depreciation deductions were allowed. The results of the sale are

Sec. 1250 requires a portion of gain realized on the sale of a buildings used in a business and depreciated under MACRS to be recaptured as ordinary gain.

Section 1250 does not apply to assets sold or exchanged at a loss.

This year Jenna had the gains and losses noted below on property, plant and equipment used in her business. Each asset had been held longer than one year. Jenna has not previously disposed of any business assets. Jenna will recognize

In 2015, Thomas, who has a marginal tax rate of 15%, sells land that is Sec. 1231 property at a gain of $4,000. If he has no other 1231 transactions or capital asset transactions and has no nonrecaptured 1231 gain, Thomas will pay no tax on the $4,000 gain.

In order to be considered Sec. 1231 property, all of the following livestock must be held for 12 months or more from date of acquisition except

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.

Connors Corporation sold a warehouse during the current year for $980,000. The building had been acquired in 1980 at a cost of $830,000. The building is fully depreciated. What is the amount and nature of the gain or loss on the sale of the warehouse?

Which of the following assets is 1231 property?

Daniel recognizes $35,000 of Sec. 1231 gains and $25,000 of Sec. 1231 losses during the current year. The only other Sec. 1231 item was a $4,000 loss three years ago. This year, Daniel must report

If a taxpayer has gains on Sec. 1231 assets, Secs. 1245 and 1250 must be applied first to determine any amounts recaptured as ordinary income, and any excess gain may then be netted with Sec. 1231 losses for possible long-term capital gain treatment.

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

An Introduction to Taxation

Determination of Tax

Gross Income: Inclusions

Gross Income: Exclusions

Property Transactions: Capital Gains and Losses

Deductions and Losses

Itemized Deductions

Losses and Bad Debts

Employee Expenses and Deferred Compensation

Depreciation, Cost Recovery, Amortization, and Depletion

Accounting Periods and Methods

Property Transactions: Nontaxable Exchanges

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

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