Exam 11: Property Dispositions

Alpha sold machinery that it used in its business to Beta, a related entity, for $40,000. Beta used the machinery in its business. Alpha bought the machinery a few years ago for $50,000 and has claimed $30,000 of depreciation expense. What is the amount and character of Alpha's gain?

Frederique sold furniture that she uses in her business for $15,000. Frederique bought the furniture a few years ago for $40,000 and has claimed $20,000 of depreciation expense. What is the amount and character of Frederique's gain or loss?

Odintz traded land for land. Odintz originally purchased its land for $150,000. The land received was purchased for $200,000 and was subject to a mortgage of $50,000 that was paid off before the transfer. The fair market value of the new land is $240,000. What is Odintz's adjusted basis in the new land after the exchange?

Which of the following realized gains results in a recognized gain?

Sarah sold 1,000 shares of stock to her brother, David, for $20,000 more than a year ago. Sarah had purchased the stock for $21,000 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 $15,500 or $25,500?

Tyson had a parcel of undeveloped investment land that he wanted to trade for a warehouse to be used in his business. He found a buyer willing to pay him $450,000 for the land. He transferred the land to a third party intermediary on April 1st of the current year. On May 10th, with the help of a commercial real estate agent, Tyson identified two suitable warehouses. On August 10th he made an offer on the first building and was rejected. On August 13th an offer was accepted on the second warehouse. On September 23rd the third party intermediary transferred $500,000 ($450,000 from the original property plus $50,000 from Tyson)to the seller and conveyed title to the warehouse to Tyson. Explain whether the exchange of property qualifies as a like-kind exchange.

Buzz Corporation sold an office building that it used in its business for $500,700. Buzz bought the building 10 years ago for $649,650 and has claimed $199,650 of depreciation expense. What is the amount and character of Buzz's gain or loss?

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

An asset's tax-adjusted basis is usually greater than its book-adjusted basis.

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?

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?

Only accelerated depreciation is recaptured for §1245 assets.

For a like-kind exchange, realized gain is deferred if the exchange is solely for like-kind property.

Reid had a business building destroyed in a fire. The old building was purchased for $375,700, and $58,600 of depreciation deductions had been taken. Although the old building had a fair market value of $424,930 at the time of the fire, his insurance proceeds were limited to $398,600. Reid found qualified replacement property that he acquired six months later for $389,300. What is the amount of Reid's realized gain and recognized gain?

Silver sold machinerythat it used in its business to Gold, a related entity, for $54,450. Silver bought the equipment a few years ago for $50,550 and has claimed $14,450 of depreciation expense. What is the amount and character of Silver's gain?

When do unrecaptured §1250 gains apply?

The general rule regarding the exchanged basis in the new property received in a like-kind exchange is:

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?

In the current year, Raven sold machinery with a fair market value of $200,000. The machinery's original basis was $190,000 and Raven's accumulated depreciation on the machinery was $40,000, so its adjusted basis to Raven was $150,000. Raven received $50,000 in the current year and a note paying Raven $75,000 a year for two years beginning next year. What is the amount and character of the gain that Raven will recognize in the current year?

Reid had a business building destroyed in a fire. The old building was purchased for $375,000, and $60,000 of depreciation deductions had been taken. Although the old building had a fair market value of $425,000 at the time of the fire, his insurance proceeds were limited to $400,000. Reid found qualified replacement property that he acquired six months later for $390,000. What is the amount of Reid's realized gain and recognized gain?