Exam 13: Property Transactions: Section 1231 and Recapture

Pete sells equipment for $15,000 to Marcel,his son.The equipment cost $20,000 and has accumulated depreciation of $12,000.Marcel will use the equipment in his business. a.What is the amount and character of Pete's gain on the sale? b.How does your answer change if the sales price is $22,000?

Describe the tax treatment for a noncorporate taxpayer in the 39.6% marginal tax bracket who sells each of the first two assets for $500,000 and each of the second two assets for $750,000.Each asset was purchased in 2009 and is used in a trade or business.There are no other gains and losses and no nonrecaptured Section 1231 losses.

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

WAM Corporation sold a warehouse during the current year for $830,000.The building had been acquired in 1989 at a cost of $730,000 and had total straight-line depreciation of $510,000. What is the amount and nature of the gain or loss on the sale of the warehouse?

Eric purchased a building in 2003 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

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.

Depreciable property used in a trade or business for one year or less is considered Sec.1231 property.

Jesse installed solar panels in front of his office building in 2011.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?

Any gain or loss resulting from the sale or disposition of depreciable property used in trade or business and held one year or less is considered ordinary.

Pam owns a building used in her trade or business that was placed into service in 2001.The building cost $450,000 and depreciation to date amounts to $200,000.Pam sells the building for $380,000.It is the only asset she sells this year,and she has no nonrecaptured Sec.1231 losses.What is the amount of recognized gain and the nature of the gain? How will the gain be taxed?

When gain is recognized on an involuntary conversion,gain is subject to recapture under Sec.1245 or Sec.1250.

For a business,Sec.1231 property does not include

Sec.1245 applies to gains on the sale of depreciable personal property,but it generally does not apply to depreciable real property.

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 section 1231 gain?

During the current year,Hugo sells equipment for $150,000.The equipment cost $175,000 when placed in service two years ago,and $55,000 of depreciation deductions were allowed.The results of the sale are

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?

A building used in a business for more than a year is sold.Sec.1250 will not cause depreciation recapture if

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.

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?

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