Question 1

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

Accepted Answer

A) goats. 
B) hogs. 
C) sheep. 
D) cattle. 
A) goats. 
B) hogs. 
C) sheep. 
D) cattle.

Question 2

If a taxpayer has gains on Sec.1231 assets,Secs.1245 and 1250 must be applied first to determine any amounts recaptured as ordinary income,and any excess gain may then be netted with Sec.1231 losses for possible long-term capital gain treatment.

Accepted Answer

A) True 
 B)False

Question 3

Douglas bought office furniture two years and four months ago for $25,000 to use in his business and elected to expense all of it under Sec.179.Depreciation of $3,500 would have been taken under the MACRS rules.If Douglas converts the furniture to nonbusiness use today,Douglas must

Accepted Answer

A) amend the prior two years tax returns. 
B) include $3,500 in gross income in year of conversion. 
C) include $21,500 in gross income in year of conversion. 
D) include $25,000 in gross income in year of conversion. 
A) amend the prior two years tax returns. 
B) include $3,500 in gross income in year of conversion. 
C) include $21,500 in gross income in year of conversion. 
D) include $25,000 in gross income in year of conversion.

Question 4

Network Corporation purchased $200,000 of five-year equipment on March 24,2015.They elected to expense $60,000 of the cost under Sec.179 in effect that year.After depreciating the equipment $28,000 in 2016 and $22,400 in 2017,the equipment was sold for $190,000.
a.What is the amount of the realized gain (or loss)on the sale?
b.How is the gain or loss taxed?

Accepted Answer

a.The realized gain is $100,40

Question 5

Melissa acquired oil and gas properties for $600,000.During 2016 she elected to expense the $180,000 of IDC.Total depletion allowed was $50,000.During the current year,Melissa sells the property for $700,000.
a.What is the amount of and nature of her gain using the facts above?
b.What is the amount of and nature of her gain assuming that she sold the property for $850,000?

Accepted Answer

a.Melissa has realized gain of $150,000

Question 6

All of the following are considered related parties for purposes of Sec.1239 recapture with the exception of

Accepted Answer

A) an individual and a partnership where the individual has a one-fourth interest in the partnership. 
B) an individual and a corporation where the individual owns more than 50% of the value of the outstanding stock of the corporation. 
C) an individual and a corporation where the individual's spouse owns more than 50% of the value of the outstanding stock of the corporation. 
D) an individual and a partnership where the individual owns more than 50% of the capital of the partnership. 
A) an individual and a partnership where the individual has a one-fourth interest in the partnership. 
B) an individual and a corporation where the individual owns more than 50% of the value of the outstanding stock of the corporation. 
C) an individual and a corporation where the individual's spouse owns more than 50% of the value of the outstanding stock of the corporation. 
D) an individual and a partnership where the individual owns more than 50% of the capital of the partnership.

Question 7

Eric purchased a building in 2006 that he uses in his business.Eric uses the straight-line method for the building.Eric's original cost for the building is $420,000 and cost-recovery deductions are $120,000.Eric is in the top tax bracket and has never sold any other business assets.If the building is sold for $560,000,the tax results are

Accepted Answer

A) $260,000 Sec.1231 gain,all taxable at 20%. 
B) $260,000 unrecaptured Sec.1250 gain,all taxable at 25%. 
C) $260,000 Sec.1231 gain,of which $120,000 is unrecaptured Sec.1250 gain taxable at 25% and the $140,000 balance is taxable at 20%. 
D) $120,000 Sec.1245 ordinary income,$140,000 Sec.1231 gain taxable at 20%. 
A) $260,000 Sec.1231 gain,all taxable at 20%. 
B) $260,000 unrecaptured Sec.1250 gain,all taxable at 25%. 
C) $260,000 Sec.1231 gain,of which $120,000 is unrecaptured Sec.1250 gain taxable at 25% and the $140,000 balance is taxable at 20%. 
D) $120,000 Sec.1245 ordinary income,$140,000 Sec.1231 gain taxable at 20%.

Question 8

In addition to the normal recapture rules of Sec.1250,corporations which sell depreciable real estate are subject to additional recapture rules of Sec.291.

Accepted Answer

A) True 
 B)False

Question 9

Octet Corporation placed a small storage building in service in 2001.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

Accepted Answer

A) ordinary gain of $60,000 and Sec.1231 gain of $540,000. 
B) ordinary gain of $300,000 and Sec.1231 gain of $300,000. 
C) ordinary gain of $600,000. 
D) Sec.1231 gain of $600,000. 
A) ordinary gain of $60,000 and Sec.1231 gain of $540,000. 
B) ordinary gain of $300,000 and Sec.1231 gain of $300,000. 
C) ordinary gain of $600,000. 
D) Sec.1231 gain of $600,000.

Question 10

Trena LLC,a tax partnership owned equally by Trent and Nina,sells a building it had placed in service five years ago.Sec.291 will require that part of the gain (up to 20% of accumulated depreciation)be treated as ordinary gain,with the balance treated as Sec.1231 gain.

Accepted Answer

A) True 
 B)False

Question 11

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.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) $3 million Sec.1231 gain. 
B) $3 million ordinary gain 
C) $2 million ordinary income and $1 million Sec.1231 gain. 
D) $1.2 million ordinary income and $1.8 million Sec.1231 gain. 
A) $3 million Sec.1231 gain. 
B) $3 million ordinary gain 
C) $2 million ordinary income and $1 million Sec.1231 gain. 
D) $1.2 million ordinary income and $1.8 million Sec.1231 gain.

Question 13

What is the purpose of Sec.1245 and what is its significance?

Accepted Answer

The purpose of Sec.1245 is to eliminate

Question 14

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

Accepted Answer

A) capitalized. 
B) deducted as an expense of operations when incurred and also deducted from the sales price at the time of the sale. 
C) deducted when incurred if the land is sold but capitalized if the land is exchanged. 
D) deducted as an expense of operations when incurred. 
A) capitalized. 
B) deducted as an expense of operations when incurred and also deducted from the sales price at the time of the sale. 
C) deducted when incurred if the land is sold but capitalized if the land is exchanged. 
D) deducted as an expense of operations when incurred.

Question 15

Clarise bought a building three years ago for $180,000 to use in her business.The straight-line method of depreciation was used and $15,000 of depreciation deductions were allowed.During the current year,Clarise sells the building to her wholly owned corporation for $235,000.The tax results to Clarise are

Accepted Answer

A) $70,000 ordinary income. 
B) $70,000 of Sec.1231 gain. 
C) $55,000 ordinary income and $15,000 Sec.1231 gain. 
D) $15,000 of ordinary income and $55,000 Sec.1231 gain. 
A) $70,000 ordinary income. 
B) $70,000 of Sec.1231 gain. 
C) $55,000 ordinary income and $15,000 Sec.1231 gain. 
D) $15,000 of ordinary income and $55,000 Sec.1231 gain.

Question 16

Sec.1231 property will generally have all the following characteristics except

Accepted Answer

A) real or depreciable property. 
B) used in trade or business. 
C) held for sale to customers. 
D) held for more than one year. 
A) real or depreciable property. 
B) used in trade or business. 
C) held for sale to customers. 
D) held for more than one year.

Question 17

Jaiyoun sells Sec.1231 property this year,resulting in a $4,000 gain.This is the first time he has disposed of any Sec.1231 property.Jaiyoun's tax rate is 10%.His tax on the Sec.1231 gain will be

Accepted Answer

A) $0. 
B) $400. 
C) $600. 
D) $1,120. 
A) $0. 
B) $400. 
C) $600. 
D) $1,120.

Question 18

The following are gains and losses recognized in 2017 on Ann's business assets that were held for more than one year.The assets qualify as Sec.1231 property.
   A summary of Ann's net Sec.1231 gains and losses for the previous five-year period is as follows:
   Describe the specific tax treatment of each of the current year transactions.

Accepted Answer

The $20,000 gain from the casualty is tr

Question 19

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

Accepted Answer

A) $12,000 net LTCG. 
B) $12,000 ordinary income. 
C) $14,000 ordinary income. 
D) $10,000 ordinary income and $2,000 net LTCG. 
A) $12,000 net LTCG. 
B) $12,000 ordinary income. 
C) $14,000 ordinary income. 
D) $10,000 ordinary income and $2,000 net LTCG.

Question 20

Pierce has a $16,000 Sec.1231 loss,a $12,000 Sec.1231 gain,and a salary of $50,000.What is the treatment of these items in Pierce's AGI?

Accepted Answer

A) Pierce has a LTCG of $12,000 and a net ordinary income of $34,000. 
B) The 1231 gains and losses are treated as ordinary gains and losses making Pierce's AGI for the year $46,000. 
C) Pierce has a $3,000 LTCL which is deductible for AGI making AGI $47,000.He also has a $1,000 LTCL carryover. 
D) Pierce has net LTCG of $9,000 and $37,000 of net ordinary income. 
A) Pierce has a LTCG of $12,000 and a net ordinary income of $34,000. 
B) The 1231 gains and losses are treated as ordinary gains and losses making Pierce's AGI for the year $46,000. 
C) Pierce has a $3,000 LTCL which is deductible for AGI making AGI $47,000.He also has a $1,000 LTCL carryover. 
D) Pierce has net LTCG of $9,000 and $37,000 of net ordinary income.

Exam 29: Property Transactions: Sec1231 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

If a taxpayer has gains on Sec.1231 assets,Secs.1245 and 1250 must be applied first to determine any amounts recaptured as ordinary income,and any excess gain may then be netted with Sec.1231 losses for possible long-term capital gain treatment.

Douglas bought office furniture two years and four months ago for $25,000 to use in his business and elected to expense all of it under Sec.179.Depreciation of $3,500 would have been taken under the MACRS rules.If Douglas converts the furniture to nonbusiness use today,Douglas must

All of the following are considered related parties for purposes of Sec.1239 recapture with the exception of

In addition to the normal recapture rules of Sec.1250,corporations which sell depreciable real estate are subject to additional recapture rules of Sec.291.

Octet Corporation placed a small storage building in service in 2001.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

Trena LLC,a tax partnership owned equally by Trent and Nina,sells a building it had placed in service five years ago.Sec.291 will require that part of the gain (up to 20% of accumulated depreciation)be treated as ordinary gain,with the balance treated as Sec.1231 gain.

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.

What is the purpose of Sec.1245 and what is its significance?

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

Sec.1231 property will generally have all the following characteristics except

Jaiyoun sells Sec.1231 property this year,resulting in a $4,000 gain.This is the first time he has disposed of any Sec.1231 property.Jaiyoun's tax rate is 10%.His tax on the Sec.1231 gain will be

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

Pierce has a $16,000 Sec.1231 loss,a $12,000 Sec.1231 gain,and a salary of $50,000.What is the treatment of these items in Pierce's AGI?

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