Question 1

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

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)    A

Question 2

Hilton,a single taxpayer in the 28% marginal tax bracket,has $16,000 of nonrecaptured net Sec.1231 losses,at the beginning of a year in which he had the following transactions:
-Sale of Asset A at a $10,000 1231 gain,all of which is unrecaptured Sec.1250 gain
-Sale of Asset B at a $13,000 1231 gain
How are the items reported this year and at which rate(s)are the amounts taxed?

Accepted Answer

Asset A- The entire gain from the sale of Asset A is ordinary income due to the five-year lookback.The full $10,000 gain will be taxed at 28%.
Asset B- As a result of the five-year lookback rule,$6,000 of the gain on the sale of Asset B is ordinary income ($16,000 nonrecaptured losses less $10,000 ordinary income on sale of asset A)taxed at 28%; the remaining $7,000 1231 gain is taxed at 15%

Question 3

Sec.1231 property must satisfy a holding period of more than one year.

Accepted Answer

A) True 
 B)False  True

Question 4

Pierce has a $16,000 Section 1231 loss,a $12,000 Section 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.

Question 5

During the current year,George recognizes a $30,000 Section 1231 gain on sale of land and a $18,000 Section 1231 loss on the sale of land.Prior to this,George's only Section 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 6

Emma owns a small building ($120,000 basis and $123,000 FMV)and equipment ($35,000 basis and $22,000 FMV).Both assets were acquired three years ago,are used in Emma's business,and are depreciated using straight-line depreciation.Both are destroyed by fire.Insurance proceeds were equal to their FMVs.Only one other transfer of an asset occurs during the year,and a $3,000 LTCL is recognized.After considering all transactions,the tax result to Emma is a

Accepted Answer

A) $13,000 NLTCL. 
B) $13,000 ordinary loss. 
C) $3,000 LTCG; $3,000 LTCL; and $13,000 ordinary loss. 
D) $10,000 net ordinary loss and a $3,000 NLTCL. 
A) $13,000 NLTCL. 
B) $13,000 ordinary loss. 
C) $3,000 LTCG; $3,000 LTCL; and $13,000 ordinary loss. 
D) $10,000 net ordinary loss and a $3,000 NLTCL.

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

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.

Accepted Answer

The $24,000 casualty gain is treated as

Question 9

During the current year,a corporation sells equipment for $300,000.The equipment cost $270,000 when purchased and placed in service two years ago and $60,000 of depreciation deductions were allowed.The results of the sale are

Accepted Answer

A) ordinary income of $90,000. 
B) Sec.1231 gain of $90,000. 
C) ordinary income of $60,000 and LTCG of $30,000. 
D) ordinary income of $60,000 and Sec.1231 gain of $30,000. 
A) ordinary income of $90,000. 
B) Sec.1231 gain of $90,000. 
C) ordinary income of $60,000 and LTCG of $30,000. 
D) ordinary income of $60,000 and Sec.1231 gain of $30,000.

Question 10

Why did Congress establish favorable treatment for 1231 assets?

Accepted Answer

A) to encourage the mobility of capital 
B) to allow a larger deduction for losses 
C) to help business owners replace assets which had declined in value 
D) All of the above 
A) to encourage the mobility of capital 
B) to allow a larger deduction for losses 
C) to help business owners replace assets which had declined in value 
D) All of the above

Question 11

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 12

Lucy,a noncorporate taxpayer,experienced the following Section 1231 gains and losses during the years 2008 through 2013.Her first disposition of a Sec.1231 asset occurred in 2008.Assuming Lucy had no capital gains and losses during that time period,what is the tax treatment in each of the years listed?

Accepted Answer

The answer of Lucy,a noncorporate taxpayer,experienced the following Section 1231...

Question 13

The amount recaptured as ordinary income under either Sec.1245 or Sec.1250 can never exceed the realized gain.

Accepted Answer

A) True 
 B)False

Question 14

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.

Accepted Answer

A) True 
 B)False

Question 15

Daniel recognizes $35,000 of Sec.1231 gains and $25,000 of Sec.1231 losses during the current year.The only other Sec.1231 item was a $4,000 loss three years ago.This year,Daniel must report

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 16

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)?

Accepted Answer

The answer of Julie sells her manufacturing plant and land...

Question 17

Costs of tangible personal business property which are expensed under Sec.179 are subject to recapture if the property is converted to nonbusiness use before the end of the MACRS recovery period.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

The purpose of Sec.1245 is to eliminate

Question 19

The following gains and losses pertain to Arnold's business assets that qualify as Sec.1231 property.Arnold 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.

Accepted Answer

The $25,000 casualty loss is an ordinary

Question 20

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

Accepted Answer

A) True 
 B)False

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

Sec.1231 property must satisfy a holding period of more than one year.

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

During the current year,George recognizes a $30,000 Section 1231 gain on sale of land and a $18,000 Section 1231 loss on the sale of land.Prior to this,George's only Section 1231 item was a $14,000 loss six years ago.George must report a

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

During the current year,a corporation sells equipment for $300,000.The equipment cost $270,000 when purchased and placed in service two years ago and $60,000 of depreciation deductions were allowed.The results of the sale are

Why did Congress establish favorable treatment for 1231 assets?

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

The amount recaptured as ordinary income under either Sec.1245 or Sec.1250 can never exceed the realized gain.

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.

Daniel recognizes $35,000 of Sec.1231 gains and $25,000 of Sec.1231 losses during the current year.The only other Sec.1231 item was a $4,000 loss three years ago.This year,Daniel must report

Costs of tangible personal business property which are expensed under Sec.179 are subject to recapture if the property is converted to nonbusiness use before the end of the MACRS recovery period.

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

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

An Introduction to Taxation

Determination of Tax

Gross Income: Inclusions

Gross Income: Exclusions

Property Transactions: Capital Gains and Losses

Deductions and Losses

Itemized Deductions

Losses and Bad Debts

Employee Expenses and Deferred Compensation

Depreciation, cost Recovery, amortization, and Depletion

Accounting Periods and Methods

Property Transactions: Nontaxable Exchanges

Special Tax Computation Methods, tax Credits, and Payment of Tax

Tax Research

Corporations

Partnerships and S Corporations

Taxes and Investment Planning

Filters

Exam 13: Property Transactions: Section 1231 and Recapture

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

Sec.1231 property must satisfy a holding period of more than one year.

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

During the current year,George recognizes a $30,000 Section 1231 gain on sale of land and a $18,000 Section 1231 loss on the sale of land.Prior to this,George's only Section 1231 item was a $14,000 loss six years ago.George must report a

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

During the current year,a corporation sells equipment for $300,000.The equipment cost $270,000 when purchased and placed in service two years ago and $60,000 of depreciation deductions were allowed.The results of the sale are

Why did Congress establish favorable treatment for 1231 assets?

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

The amount recaptured as ordinary income under either Sec.1245 or Sec.1250 can never exceed the realized gain.

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.

Daniel recognizes $35,000 of Sec.1231 gains and $25,000 of Sec.1231 losses during the current year.The only other Sec.1231 item was a $4,000 loss three years ago.This year,Daniel must report

Costs of tangible personal business property which are expensed under Sec.179 are subject to recapture if the property is converted to nonbusiness use before the end of the MACRS recovery period.

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

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

An Introduction to Taxation

Determination of Tax

Gross Income: Inclusions

Gross Income: Exclusions

Property Transactions: Capital Gains and Losses

Deductions and Losses

Itemized Deductions

Losses and Bad Debts

Employee Expenses and Deferred Compensation

Depreciation, cost Recovery, amortization, and Depletion

Accounting Periods and Methods

Property Transactions: Nontaxable Exchanges

Special Tax Computation Methods, tax Credits, and Payment of Tax

Tax Research

Corporations

Partnerships and S Corporations

Taxes and Investment Planning

Filters