Exam 14: Property Transactions: Capital Gains and Losses, section 1231 and Recapture Provisions

The maximum amount of the unrecaptured § 1250 gain (25% gain) is the depreciation taken on real property sold at a recognized gain.

The maximum § 1245 depreciation recapture generally equals the accumulated depreciation.

The possible holding periods for capital assets include:

Stella purchased vacant land in 2008 that she subdivided for resale as lots.All 10 of the lots were sold during 2015.The lots had a tax basis of $12,000 each and sold for $35,000 each.Stella made no substantial improvements to the lots.She acted as her own real estate broker;so there were no sales expenses for selling the lots.Which of the following statements is correct?

Hiram is a computer engineer and,while unemployed,invents a switching device for computer networks.He patents the device,but does not reduce it to practice.Hiram has a zero tax basis for the patent.In consideration of $800,000 plus a $1 royalty per device sold,Hiram assigns the patent to a computer manufacturing company.Hiram assigned all substantial rights in the patent.Which of the following is correct?

A worthless security had a holding period of 6 months when it became worthless on December 10,2015.The investor who had owned the security had a basis of $20,000 for it.Which of the following statements is correct?

Section 1245 depreciation recapture potential does not carryover from the deceased taxpayer to the beneficiary taxpayer.

On June 1,2015,Brady purchased an option to buy 1,000 shares of General,Inc.at $40 per share.He purchased the option for $3,000.It was to remain in effect for five months.The market experienced a decline during the latter part of the year,so Brady decided to let the option lapse as of December 1,2015.On his 2015 tax return,what should Brady report?

Depreciation recapture under § 1245 and § 1250 is reported on Form 4797.

The § 1245 depreciation recapture potential does not reduce the amount of the charitable contribution deduction under § 170.

Section 1231 lookback losses may convert some or all of § 1245 gain into ordinary income.

Section 1250 depreciation recapture will apply when accelerated depreciation was used on property used outside the United States and the property is sold at a gain.

Recognized gains and losses from disposition of a capital asset may occur as a result of a:

Section 1245 may apply to amortizable § 197 intangible assets.

Which of the following events causes the purchaser of an option to add the cost of the option to the basis of the property to which the option relates?

A business taxpayer sells inventory for $80,000.The adjusted basis of the property is $58,000 at the time of the sale and the inventory had been held more than one year.The taxpayer has:

Lana purchased for $1,410 a $2,000 bond when it was issued two years ago.Lana amortized $200 of the original issue discount and then sold the bond for $1,800.Which of the following statements is correct?

Property sold to a related party purchaser that is depreciable by the purchaser may cause the seller to have ordinary gain.

Stanley operates a restaurant as a sole proprietorship.Which of the following items are capital assets in the hands of Stanley?

For § 1245 recapture to apply,accelerated depreciation must have been taken on the property.