Exam 17: Property Transactions: 1231 and Recapture Provisions

Depreciable personal property was sold at a gain in 2016. On what 2016 form would this transaction be reported, where initially in that form, and what will the form most likely do with the gain?

Vertigo, Inc., has a 2017 net § 1231 loss of $64,000 and had a $32,000 net § 1231 gain in 2016. For 2017, Vertigo's net § 1231 loss is treated as:

Which of the following assets held by a manufacturing business is a § 1231 asset?

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

A business taxpayer sold all the depreciable assets of the business, calculated the gains and losses, and would like to know the final character of those gains and losses. The taxpayer had $353,000 of adjusted gross income before considering the gains and losses from sale of the business assets. The taxpayer had unrecaptured § 1231 lookback loss of $12,000. What is the treatment of the gains and losses summarized in the chart below after all possible netting and reclassification has been completed? What is the taxpayer's adjusted gross income? (Ignore the self-employment tax deduction.)

Which of the following is correct?

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

If there is a net § 1231 loss, it is treated as an ordinary loss.

Section 1231 property generally does not include accounts receivables arising in the ordinary course of business.

The Code contains two major depreciation recapture provisions: § 1245 and § 1250.

Rental use depreciable machinery held more than 12 months is an example of a § 1231 asset.

Personal use property casualty gains and losses are not subject to the § 1231 rules.

Betty, a single taxpayer with no dependents, has the gains and losses shown below. Before considering these transactions, Betty has $45,000 of other taxable income. What is the treatment of the gains and losses and what is Betty's taxable income?

Red Company had an involuntary conversion on December 23, 2017. The machinery had been acquired on April 1, 2015, for $49,000 and its adjusted basis was $14,200. The machinery was completely destroyed by fire and Red received $10,000 of insurance proceeds for the machine and did not replace it. This was Red's only casualty or theft event for the year. As a result of this event, Red initially has:

Which of the following would extinguish the § 1245 recapture potential?

Involuntary conversion gains may be deferred if the proceeds of the involuntary conversion are reinvested.

Section 1245 applies to amortizable § 197 intangible assets.

A personal use property casualty loss is generally deductible only to the extent it exceeds 10% of AGI.

Nonrecaptured § 1231 losses from the six prior tax years may cause current year net § 1231 gain to be treated as ordinary income.

Vanna owned an office building that had been held more than one year when it was sold for $567,000. The real estate had an adjusted basis of $45,000 for the land and $233,000 for the building. Straight-line depreciation of $162,000 had been taken on the building. What is the amount and initial character of the gain or loss from disposition of the real estate? Is any of the gain unrecaptured § 1250 (25%) gain?