Exam 28: Property Transactions: Section 1231 and Recapture

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

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

Emily, whose tax rate is 28%, owns an office building which she purchased for $900,000 on March 18 of last year. The building is sold for $950,000 on February 20 of this year when the adjusted basis of the building was $876,000. The tax results to Emily are

Jeremy has $18,000 of Section 1231 gains and $23,000 of Section 1231 losses. The gains and losses are characterized as

The purpose of Sec. 1245 is to eliminate the advantage taxpayers would have if they were able to reduce ordinary income by depreciation deductions and also receive favorable Sec. 1231 treatment when the asset was sold.

Unrecaptured 1250 gain is the amount of long-term capital gain which would be taxed as ordinary income if Sec. 1250 provided for the recapture of all depreciation and not just additional depreciation.

Heather purchased undeveloped land to drill for oil and gas. She spent $800,000 on intangible drilling costs during the year of purchase, which she elected to immediately deduct. During the three years of the well's operation, Heather deducted $1.2 million of cost depletion. Heather has sold the property for a $3 million gain. The gain will be treated as

Cobra Inc. sold stock for a $25,000 loss five years ago. It has been carrying over the capital loss for five years, and the loss will expire at the end of this year because Cobra has not had any capital gains. Earlier this year Cobra sold a parcel of land held four years for business use and will recognize a $30,000 gain. Cobra is thinking about selling some machinery used in its business for the past three years. During this time technology has dramatically changed so Cobra will recognize a $32,000 loss on the sale of the machinery. Cobra is trying to decide whether to sell the machinery at year-end or early next year. Cobra is profitable and has a consistent marginal tax rate of 35%. When should Cobra sell the equipment?

Emma owns a small building ($120,000 basis and $123,000 FMV) and equipment ($35,000 basis and $22,000 FMV). Both assets were acquired three years ago, are used in Emma's business, and are depreciated using straight-line depreciation. Both are destroyed by fire. Insurance proceeds were equal to their FMVs. Only one other transfer of an asset occurs during the year, and a $3,000 LTCL is recognized. After considering all transactions, the tax result to Emma is a

Mark owns an unincorporated business and has $20,000 of Section 1231 gains and $22,000 of Section 1231 losses. He must report a net capital loss of $2,000 on his tax return.

For a business, Sec. 1231 property does not include

On June 1, 2013, Buffalo Corporation purchased and placed in service 7-year MACRS tangible property costing $100,000. On November 10, 2016, Buffalo sold the property for $102,000 after having taken MACRS $47,525 in depreciation deductions. What is the amount and character of Buffalo's gain?

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.

Gain due to depreciation recapture is included in the netting of Sec. 1231 gains and losses.

A taxpayer acquired new machinery costing $50,000 three years ago. The taxpayer had elected Sec. 179 expensing to deduct the full cost in the year of acquisition. The taxpayer sells the machinery this year and realizes a $32,000 gain. Sec. 1245 will not require any ordinary income recapture on the sale of this asset due to the Sec. 179 expensing.

WAM Corporation sold a warehouse during the current year for $830,000. The building had been acquired in 1991 at a cost of $730,000 and had total straight-line depreciation of $510,000. What is the amount and nature of the gain or loss on the sale of the warehouse?

When gain is recognized on an involuntary conversion, gain is subject to recapture under Sec. 1245 or Sec.1250.

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?

Terry has sold equipment used in her business. She acquired the equipment three years ago for $50,000 and has recognized $30,000 of depreciation across the years in use. In order to recognize any Sec. 1231 gain, she must sell the equipment for more than

If Section 1231 applies to the sale or exchange of an unharvested crop sold with land, the costs of producing the crop are