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. $\begin{array}{|l|c|c|} \hline& \text { Building No. } 1 & \text { Building No. 2 } \\ \hline \text { Date acquired } & 1986 & 1986 \\ \hline \text { Cost } & \$ 800,000 & \$ 900,000 \\ \hline\text { Accum. Depreciation }&800,000\\\text { -Straight-line }\\ \hline\text {-ACRS depreciation } & & 900,000 \\ \hline \text { Selling Price } & 80,000 & 400,000 \\ \hline \end{array}$ How much gain from these sales should be reported as Sec.1231 gain and ordinary income due to depreciation recapture by the owner of the business?

A) \[\begin{array} { |l | l| } \hline\text { Sec. 1231 Gain } & \text { Ordinary Income } \\ \hline \$ 480,000 & \$ 0 \\ \hline \end{array}\] B) \[\begin{array} {| l | l| } \hline\text { Sec. 1231 Gain } & \text { Ordinary Income } \\ \hline \$ 80,000 & \$ 400,000 \\ \hline \end{array}\] C) \[\begin{array} {| l | l |} \hline\text { Sec. 1231 Gain } & \text { Ordinary Income } \\ \hline \$ 0 & \$ 480,000\\\hline \end{array}\] D) \[\begin{array} {| l | l |} \hline\text { Sec. 1231 Gain } & \text { Ordinary Income } \\ \hline \$ 400,000 & \$ 80,000 \\ \hline \end{array}\] A) \[\begin{array} { |l | l| } \hline\text { Sec. 1231 Gain } & \text { Ordinary Income } \\ \hline \$ 480,000 & \$ 0 \\ \hline \end{array}\] B) \[\begin{array} {| l | l| } \hline\text { Sec. 1231 Gain } & \text { Ordinary Income } \\ \hline \$ 80,000 & \$ 400,000 \\ \hline \end{array}\] C) \[\begin{array} {| l | l |} \hline\text { Sec. 1231 Gain } & \text { Ordinary Income } \\ \hline \$ 0 & \$ 480,000\\\hline \end{array}\] D) \[\begin{array} {| l | l |} \hline\text { Sec. 1231 Gain } & \text { Ordinary Income } \\ \hline \$ 400,000 & \$ 80,000 \\ \hline \end{array}\]

Exam 29: Property Transactions: Sec1231 and Recapture

Octet Corporation placed a small storage building in service 15 years ago.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

(Multiple Choice)

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Question 21

During the current year,George recognizes a $30,000 Sec.1231 gain on sale of land and a $18,000 Sec.1231 loss on the sale of land.Prior to this,George's only Sec.1231 item was a $14,000 loss six years ago.George must report a

(Multiple Choice)

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Question 22

If the recognized losses resulting from involuntary conversions arising from casualty or theft exceed the recognized gains from such events (i.e.,a net loss from the casualty),all of the involuntary conversions are treated as ordinary gains and losses.

(True/False)

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Question 23

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

(Multiple Choice)

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Question 24

If no gain is recognized in a nontaxable like-kind exchange involving Sec.1245 or Sec.1250 property,the recapture potential carries over to the replacement property.

(True/False)

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Question 25

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

(Multiple Choice)

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Question 26

When appreciated property is transferred at death,the recapture potential carries over to the person who receives the property from the decedent.

(True/False)

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Question 27

With respect to residential rental property

(Multiple Choice)

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Question 28

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 21%.When should Cobra sell the equipment?

(Multiple Choice)

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Question 29

Yelenis,whose tax rate is 32%,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

(Multiple Choice)

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Question 30

Gains and losses from involuntary conversions of property used in a trade or business generally are classified as capital gains and losses.

(True/False)

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Question 31

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.

(True/False)

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Question 32

If realized gain from disposition of business equipment exceeds total depreciation or cost recovery,a portion of the gain will receive Sec.1231 treatment if the equipment's holding period is more than one year.

(True/False)

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Question 33

A net Sec.1231 gain is treated as ordinary income to the extent of any nonrecaptured net Sec.1231 losses for the preceding five years.

(True/False)

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Question 34

With regard to noncorporate taxpayers,all of the following statements are true regarding Sec.1250 recapture except

(Multiple Choice)

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Question 35

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. Building No. 1 Building No. 2 Date acquired 1986 1986 Cost \ 800,000 \ 900,000 Accum. Depreciation 800,000 -Straight-line -ACRS depreciation 900,000 Selling Price 80,000 400,000 How much gain from these sales should be reported as Sec.1231 gain and ordinary income due to depreciation recapture by the owner of the business?

(Multiple Choice)

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Question 36

During the current year,Hugo sells equipment for $150,000.The equipment cost $175,000 when placed in service two years ago,and $55,000 of depreciation deductions were allowed.The results of the sale are

(Multiple Choice)

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Question 37

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

(Multiple Choice)

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Question 38

Sec.1245 recapture applies to all the following except

(Multiple Choice)

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Question 39

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

(Multiple Choice)

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Question 40

Showing 21 - 40 of 95

Exam 29: Property Transactions: Sec1231 and Recapture

Octet Corporation placed a small storage building in service 15 years ago.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

During the current year,George recognizes a $30,000 Sec.1231 gain on sale of land and a $18,000 Sec.1231 loss on the sale of land.Prior to this,George's only Sec.1231 item was a $14,000 loss six years ago.George must report a

If the recognized losses resulting from involuntary conversions arising from casualty or theft exceed the recognized gains from such events (i.e.,a net loss from the casualty),all of the involuntary conversions are treated as ordinary gains and losses.

If no gain is recognized in a nontaxable like-kind exchange involving Sec.1245 or Sec.1250 property,the recapture potential carries over to the replacement property.

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

When appreciated property is transferred at death,the recapture potential carries over to the person who receives the property from the decedent.

With respect to residential rental property

Gains and losses from involuntary conversions of property used in a trade or business generally are classified as capital gains and losses.

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.

If realized gain from disposition of business equipment exceeds total depreciation or cost recovery,a portion of the gain will receive Sec.1231 treatment if the equipment's holding period is more than one year.

A net Sec.1231 gain is treated as ordinary income to the extent of any nonrecaptured net Sec.1231 losses for the preceding five years.

With regard to noncorporate taxpayers,all of the following statements are true regarding Sec.1250 recapture except

During the current year,Hugo sells equipment for $150,000.The equipment cost $175,000 when placed in service two years ago,and $55,000 of depreciation deductions were allowed.The results of the sale are

Sec.1245 recapture applies to all the following 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

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