Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

The sale of inventory results in ordinary gain or loss.

Accepted Answer

A) True 
 B)False

Question 3

Section 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 4

If realized gain from disposition of business equipment exceeds total depreciation or cost recovery,a portion of the gain will receive Sec.1231 treatment if the equipment's holding period is more than one year.

Accepted Answer

A) True 
 B)False

Question 5

Network Corporation purchased $200,000 of five-year equipment on March 24,2011.They elected to expense $60,000 of the cost under Sec.179.After depreciating the equipment $28,000 in 2011 and $22,400 in 2012,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 6

Terry has sold equipment used in her business.She acquired three years ago for $50,000 and has recognized $30,000 of depreciation across the years in use.In order to recognize any Sec.1231 gain,she must sell the equipment for more than

Accepted Answer

A) $-0-. 
B) $20,000. 
C) $30,000. 
D) $50,000. 
A) $-0-. 
B) $20,000. 
C) $30,000. 
D) $50,000.

Question 7

Sec.1245 ordinary income recapture can apply to buildings placed in service prior to 1987.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) Sec.1245 does not apply to any buildings placed in service after 1986. 
B) Sec.1245 applies to assets sold or exchanged at a gain or at a loss. 
C) Sec.1245 property includes nonresidential real estate that qualified as recovery property under the ACRS rules unless the taxpayer elected to use the straight-line method of cost recovery. 
D) Sec.1245 ordinary applies to total depreciation or amortization allowed or allowable but not more than the realized gain. 
A) Sec.1245 does not apply to any buildings placed in service after 1986. 
B) Sec.1245 applies to assets sold or exchanged at a gain or at a loss. 
C) Sec.1245 property includes nonresidential real estate that qualified as recovery property under the ACRS rules unless the taxpayer elected to use the straight-line method of cost recovery. 
D) Sec.1245 ordinary applies to total depreciation or amortization allowed or allowable but not more than the realized gain.

Question 9

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 10

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?

Accepted Answer

A) $ -0- 
B) $200,000 
C) $800,000 
D) $1,000,000 
A) $ -0- 
B) $200,000 
C) $800,000 
D) $1,000,000

Question 11

With respect to residential rental property

Accepted Answer

A) 80% or more of the gross rental income from the building or structure must be rental income from dwelling units in order for it to be classified as residential rental property. 
B) hotels are not included in this category if less than half of the units are used on a transient basis. 
C) 80% or more of the net rental income from the building or structure must be rental income from dwelling units in order for it to be classified as residential rental property. 
D) gain is not subject to the depreciation recapture provisions if the property is held more than one year. 
A) 80% or more of the gross rental income from the building or structure must be rental income from dwelling units in order for it to be classified as residential rental property. 
B) hotels are not included in this category if less than half of the units are used on a transient basis. 
C) 80% or more of the net rental income from the building or structure must be rental income from dwelling units in order for it to be classified as residential rental property. 
D) gain is not subject to the depreciation recapture provisions if the property is held more than one year.

Question 12

An unincorporated business sold two warehouses during the current year.The straight-line depreciation method was used for Building No.1 and the accelerated method (ACRS)was used for Building No.2.Information about those buildings is presented below.
   Accum.Depreciation
   How much gain from these sales should be reported as section 1231 gain and ordinary income due to depreciation recapture?

Accepted Answer

Building No.2 is con

Question 13

In 1980,Mr.Lyle purchased a factory building to use in business for $480,000.When Mr.Lyle sells the building for $580,000,he has taken depreciation of $470,000.Straight-line depreciation would have been $400,000.Mr.Lyle must report

Accepted Answer

A) $570,000 of ordinary gain. 
B) $570,000 of Sec.1231 gain. 
C) $70,000 of ordinary income and $500,000 of Sec.1231 gain. 
D) $470,000 of ordinary gain and $100,000 of Sec.1231 gain. 
A) $570,000 of ordinary gain. 
B) $570,000 of Sec.1231 gain. 
C) $70,000 of ordinary income and $500,000 of Sec.1231 gain. 
D) $470,000 of ordinary gain and $100,000 of Sec.1231 gain.

Question 14

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

Accepted Answer

A) $8,000 net LTCG. 
B) $8,000 ordinary income. 
C) $15,000 ordinary income. 
D) $8,000 ordinary income and $7,000 net LTCG. 
A) $8,000 net LTCG. 
B) $8,000 ordinary income. 
C) $15,000 ordinary income. 
D) $8,000 ordinary income and $7,000 net LTCG.

Question 15

The following are gains and losses recognized in 2013 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 16

With regard to noncorporate taxpayers,all of the following statements are true regarding Sec.1250 recapture except

Accepted Answer

A) Sec.1250 affects the character of the gain,not the amount of the gain. 
B) Sec.1250 applies to assets sold or exchanged at either a gain or a loss. 
C) Sec.1250 ordinary income does not exist if the straight-line method of depreciation is used. 
D) Sec.1250 ordinary income is never more than the additional depreciation allowed. 
A) Sec.1250 affects the character of the gain,not the amount of the gain. 
B) Sec.1250 applies to assets sold or exchanged at either a gain or a loss. 
C) Sec.1250 ordinary income does not exist if the straight-line method of depreciation is used. 
D) Sec.1250 ordinary income is never more than the additional depreciation allowed.

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

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 19

Marta purchased residential rental property for $600,000 on January 1,1985.Total ACRS deductions for 1985 through the date of sale amounted to $600,000.If the straight-line method of depreciation had been used,depreciation would have been $600,000.The property is sold for $750,000 on January 1 of the current year.The amount and character of the gain is

Accepted Answer

A) $750,000 Sec.1231 gain. 
B) $150,000 Sec.1231 gain and $600,000 ordinary income. 
C) $750,000 ordinary gain due to Sec 1245. 
D) $750,000 ordinary gain due to Sec.1250. 
A) $750,000 Sec.1231 gain. 
B) $150,000 Sec.1231 gain and $600,000 ordinary income. 
C) $750,000 ordinary gain due to Sec 1245. 
D) $750,000 ordinary gain due to Sec.1250.

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

The sale of inventory results in ordinary gain or loss.

Section 1231 property will generally have all the following characteristics except

If realized gain from disposition of business equipment exceeds total depreciation or cost recovery,a portion of the gain will receive Sec.1231 treatment if the equipment's holding period is more than one year.

Terry has sold equipment used in her business.She acquired three years ago for $50,000 and has recognized $30,000 of depreciation across the years in use.In order to recognize any Sec.1231 gain,she must sell the equipment for more than

Sec.1245 ordinary income recapture can apply to buildings placed in service prior to 1987.

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

With respect to residential rental property

In 1980,Mr.Lyle purchased a factory building to use in business for $480,000.When Mr.Lyle sells the building for $580,000,he has taken depreciation of $470,000.Straight-line depreciation would have been $400,000.Mr.Lyle must report

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

With regard to noncorporate taxpayers,all of the following statements are true regarding Sec.1250 recapture except

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

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

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

The sale of inventory results in ordinary gain or loss.

Section 1231 property will generally have all the following characteristics except

If realized gain from disposition of business equipment exceeds total depreciation or cost recovery,a portion of the gain will receive Sec.1231 treatment if the equipment's holding period is more than one year.

Terry has sold equipment used in her business.She acquired three years ago for $50,000 and has recognized $30,000 of depreciation across the years in use.In order to recognize any Sec.1231 gain,she must sell the equipment for more than

Sec.1245 ordinary income recapture can apply to buildings placed in service prior to 1987.

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

With respect to residential rental property

In 1980,Mr.Lyle purchased a factory building to use in business for $480,000.When Mr.Lyle sells the building for $580,000,he has taken depreciation of $470,000.Straight-line depreciation would have been $400,000.Mr.Lyle must report

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

With regard to noncorporate taxpayers,all of the following statements are true regarding Sec.1250 recapture except

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

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