Exam 11: Property Dispositions

Winchester LLC sold the following business assets during the current year: (1)automobile,$30,000 cost basis,$12,000 depreciation,$20,000 proceeds; (2)machinery,$25,000 cost basis,$20,000 depreciation,$10,000 proceeds; (3)furniture,$15,000 cost basis,$10,000 depreciation,$4,000 proceeds; (4)computer equipment,$25,000 cost basis,$6,000 depreciation,$10,000 proceeds; (5)Winchester had unrecaptured §1231 losses of $3,000 in the prior five years.What are the amount and character of Winchester's gains and losses before the §1231 netting process? Assume all assets were held for more than one year.

Brandon,an individual,began business four years ago and has never sold a §1231 asset.Brandon owned each of the assets for several years.In the current year,Brandon sold the following business assets: Assuming Brandon's marginal ordinary income tax rate is 32 percent,what effect do the gains and losses have on Brandon's tax liability?

All tax gains and losses are ultimately characterized as either ordinary or capital.

For an installment sale,the gross profit percentage is the gain recognized divided by the gain realized.

After application of the look-back rule,net §1231 gains become capital while net §1231 losses become ordinary.

Only accelerated depreciation is recaptured for §1245 assets.

Bozeman sold equipment that it uses in its business for $80,000.Bozeman bought the equipment two years ago for $75,000 and has claimed $20,000 of depreciation expense.What is the amount and character of Bozeman's gain or loss?

Which one of the following is not a requirement of a deferred like-kind exchange?

Brandy sold a rental house that she owned for $150,000.Brandy bought the house four years ago for $140,000 and has claimed $25,000 of depreciation expense.What is the amount and character of Brandy's gain or loss?

Manassas purchased a computer several years ago for $2,200.On November 10^th of the current year,the computer was worth $800.If $1,000 of depreciation deductions had been taken,what is Manassas's tax-adjusted basis for the computer?

Sarah sold 1,000 shares of stock to her brother,David,for $18,000 more than a year ago.Sarah had purchased the stock for $20,000 several years earlier.What is the amount and character of David's recognized gain or loss in the current year if he sells the stock for either $15,000 or $25,000?

Luke sold land valued at $210,000.His original basis in the land was $180,000.For the land,Luke received $60,000 in cash in the current year and a note providing $150,000 in the subsequent year.What is Luke's recognized gain in the current and subsequent year,respectively?

How long after the initial exchange does a taxpayer have to identify replacement property in a like-kind exchange?

Which of the following may qualify as an installment sale?

Which of the following does not ultimately result in a capital gain or loss?

Losses on sales between related parties are realized but not recognized.

Butte sold a machine to a machine dealer for $50,000.Butte bought the machine for $55,000 several years ago and has claimed $12,500 of depreciation expense on the machine.What is the amount and character of Butte's gain or loss?

Why does §1250 recapture generally no longer apply?

Buzz Corporation sold an office building that it used in its business for $500,000.Buzz bought the building 10 years ago for $650,000 and has claimed $200,000 of depreciation expense.What is the amount and character of Buzz's gain or loss?

The gain or loss realized on the sale of an asset is always recognized for tax purposes.