Exam 29: Property Transactions: Sec1231 and Recapture

A corporation owns many acres of timber,which it acquired three years ago,and which has a $120,000 basis.The timber was cut last year for use in the corporation's business.The FMV of the timber on the first day of last year was $270,000.The corporation made the appropriate election to treat the cutting as a sale or exchange.The timber is sold for $300,000 this year.The tax result this year is

During the current year,Danika recognizes a $30,000 Sec.1231 gain and a $22,000 Sec.1231 loss.Prior to this,Danika's only Sec.1231 item was a $15,000 loss two years ago.Danika must report a(n)

All of the following statements regarding Sec.1245 are true except

The following gains and losses pertain to Jimmy's business assets that qualify as Sec.1231 property.Jimmy does not have any nonrecaptured net Sec.1231 losses from previous years,and the portion of gain recaptured as ordinary income due to the depreciation recapture provisions has been eliminated. Describe the specific tax treatment of each of these transactions.

Jeremy has $18,000 of Sec.1231 gains and $23,000 of Sec.1231 losses.The gains and losses are characterized as

Jed sells an office building during the current year for $800,000.The building was purchased in 1980 for $350,000.Jed had depreciated the building under an accelerated method,but it is now fully depreciated.Jed has never had any other Sec.1231 transactions. a.What is the recognized gain or loss on the sale of the building and the character of the gain? b.How will the gain be taxed? c.Assume the building was purchased in 1981 and depreciated under ACRS.How will the gain be taxed?

On June 1,2014,Buffalo Corporation purchased and placed in service 7-year MACRS tangible property costing $100,000.On November 10,2017,Buffalo sold the property for $102,000 after having taken MACRS $47,525 in depreciation deductions.What is the amount and character of Buffalo's gain?

An individual taxpayer sells a business building placed in service five years ago and recognizes a gain.This is the taxpayer's first and only sale of Sec.1231 property.Since the gain will be treated as LTCG,the details of the sale should be reported on Schedule D of Form 1040.

The sale of inventory results in ordinary gain or loss.

Which of the following assets is 1231 property?

Indicate whether each of the following assets are capital assets,Sec.1231 assets,or ordinary income property (property which,if sold,results in ordinary income).Assume that all of the property is held for more than one year. a.XYZ Corporation owns land used as an employee parking lot.How is the parking lot classified for tax purposes? b.Montana Corporation owns land held as an investment.How is the land classified for tax purposes? c.John,a self-employed electrician,owns an automobile he uses strictly for personal use.How is the automobile classified for tax purposes? d.Jan,a self-employed contractor,owns a truck she uses exclusively in her trade or business.How is the truck classified for tax purposes? e.Leslie owns an office building where her accounting practice is located.What is the classification of the building? f.Yvonne owns a computer for use in her job as a sales representative.She does not use the computer for personal purposes.How is the computer classified for tax purposes?

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

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.

A taxpayer has a gain on Sec.1245 property.None of the gain will be treated as Sec.1231 gain unless the sale price exceeds the original cost.

Section 1250 does not apply to assets sold or exchanged at a loss.

Gifts of appreciated depreciable property may trigger recapture of depreciation of cost-recovery deductions to the donor as of the date of gift.

Why did Congress establish favorable treatment for 1231 assets?

A taxpayer purchased a factory building in 1985 for $800,000.After claiming ACRS-accelerated depreciation of $800,000,she sells the asset for $1,000,000 during the current year.No payment is received during the current year,and the $1,000,000 balance to be paid with interest at the interest rate in four annual payments beginning one year from date of sale.The installment sales method is adopted.How much ordinary income is recognized in the current year?

Julie sells her manufacturing plant and land originally purchased in 1980.Accelerated depreciation had been taken on the building,but the building is now fully depreciated.Julie is in the 39.6% marginal tax bracket.Other information is as follows: She has not sold any other assets this year.A review of her file indicates that the only asset dispositions in the past five years was a truck sold for a $10,000 loss last year.What are the tax consequences of the sale (type of gain; rates at which taxed)?

Frisco Inc. ,a C corporation,placed a building in service in 2002 and deducted straight-line depreciation under the MACRS system in the normal manner.It sold the building this year for a substantial gain.Because straight-line depreciation was used,Frisco will not need to recognize any ordinary gain.