Exam 29: Property Transactions: Sec1231 and Recapture

Sec.1245 can increase the amount of gain recognized on an asset.

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 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.

Gains and losses resulting from condemnations of Sec.1231 property and capital assets held more than one year are classified as ordinary gains and losses.

Aamir has $25,000 of net Sec.1231 gains this year on business assets.In addition,he incurred $18,000 of loss on the sale of stock held six months.Aamir will include in his AGI

This year Pranav had the gains and losses noted below on property,plant and equipment used in his business.Each asset had been held longer than one year. A review of Pranav's reporting of Sec.1231 transactions for the prior five years indicates a net Sec.1231 loss of $14,000 three years ago and a net Sec.1231 gain of $8,000 last year (before the five-year lookback).Pranav will recognize

A business plans to sell its office building which it acquired and placed in service in 1995.Sec.1250 requires a portion of gain realized on the sale of a building used in a business and depreciated under MACRS to be recaptured as ordinary gain.

When a donee disposes of appreciated gift property,the recapture amount for the donee is computed by including the recapture amount attributable to the donor.

A corporation sold a warehouse during the current year.The straight-line depreciation method was used.Information about the building is presented below: How much gain should the corporation report as Sec.1231 gain?

For a business,Sec.1231 property does not include

Alejandro purchased a building in 1985,which he uses in his manufacturing business.Alejandro uses the ACRS statutory rates to determine the cost-recovery deduction for the building.Alejandro's original cost for the building is $500,000 and cost-recovery deductions allowed are $500,000.If the building is sold for $800,000,the tax results to Alejandro are

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?

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.

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?

Jesse installed solar panels in front of his office building in 2016.The panels are not attached to the building.After using the solar panels for 13 months,Jesse decided to replace them with a newer model to obtain a greater savings on electricity costs.Jesse sold the old solar panels for an amount greater than his original purchase price.What tax issues should be considered with purchase,use and sale of the original solar panels?

Echo Corporation plans to sell a small building to Nate,its 65% shareholder.The building was placed in service five years ago.An independent appraisal will be obtained to set the selling price at an appropriate market price,and a $50,000 gain is expected to result.The only asset previously sold by Echo was a stock investment five years ago which resulted in a $40,000 loss.If the sale of the building closes before year-end,the gain on the building will allow recognition of the capital loss carryover before it expires.

Sarah owned land with a FMV of $150,000 (adjusted basis $135,000)which is investment property (a capital asset).Sarah owned a second tract of land,a 1231 asset,with a FMV of $38,000 (adjusted basis $55,000).Both tracts were acquired in 2000 and condemned by the state this year.The state paid an amount equal to FMV.If there are no other transactions involving capital assets or 1231 assets,what is the amount that Sarah must report on her current year return?

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

Gain recognized on the sale or exchange of property between related parties is capital if the property is subject to depreciation in the hands of the transferee.