Question 1

Section 1231 applies to the sale or exchange of business properties,but not to personal use activity casualties.

Accepted Answer

A) True 
 B)False

Question 2

Copper Corporation sold machinery for $27,000 on December 31,2012.The machinery had been purchased on January 2,2009,for $30,000 and had an adjusted basis of $21,000 at the date of the sale.For 2012,what should Copper Corporation report?

Accepted Answer

A)  Ordinary income of $6,000. 
B)  A § 1231 gain of $3,000 and $3,000 of ordinary income. 
C)  A § 1231 gain of $6,000. 
D)  A § 1231 gain of $6,000 and $3,000 of ordinary income. 
E)  None of the above. 
A)  Ordinary income of $6,000. 
B)  A § 1231 gain of $3,000 and $3,000 of ordinary income. 
C)  A § 1231 gain of $6,000. 
D)  A § 1231 gain of $6,000 and $3,000 of ordinary income. 
E)  None of the above.

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Blue Company sold machinery for $45,000 on December 23,2012.The machinery had been acquired on April 1,2010,for $49,000 and its adjusted basis was $14,200.The § 1231 gain,§ 1245 recapture gain,and § 1231 loss from this transaction are:

Accepted Answer

A)  $0 § 1231 gain, $30,800 § 1245 recapture gain, $0 § 1231 loss. 
B)  $0 § 1231 gain, $0 § 1245 recapture gain, $34,800 § 1231 loss. 
C)  $4,000 § 1231 gain, $34,800 § 1245 recapture gain, $0 § 1231 loss. 
D)  $0 § 1231 gain, $34,800 § 1245 recapture gain, $14,200 § 1231 loss. 
E)  None of the above. 
A)  $0 § 1231 gain, $30,800 § 1245 recapture gain, $0 § 1231 loss. 
B)  $0 § 1231 gain, $0 § 1245 recapture gain, $34,800 § 1231 loss. 
C)  $4,000 § 1231 gain, $34,800 § 1245 recapture gain, $0 § 1231 loss. 
D)  $0 § 1231 gain, $34,800 § 1245 recapture gain, $14,200 § 1231 loss. 
E)  None of the above.

Question 6

Which of the following real property could be subject to § 1250 depreciation recapture?

Accepted Answer

A)  Leasehold improvements placed in service in 2012 on which § 168(k) additional first-year depreciation was taken. 
B)  A building acquired in 1997 on which straight-line depreciation was taken. 
C)  Equipment on which accelerated depreciation was taken. 
D)  Land which was not depreciated. 
E)  a. and b. 
A)  Leasehold improvements placed in service in 2012 on which § 168(k) additional first-year depreciation was taken. 
B)  A building acquired in 1997 on which straight-line depreciation was taken. 
C)  Equipment on which accelerated depreciation was taken. 
D)  Land which was not depreciated. 
E)  a. and b.

Question 7

The chart below describes the § 1231 assets sold by the Ecru Company (a sole proprietorship)this year.Compute the gain or loss from each asset disposition and determine the net § 1231 gain treated as long-term capital gain for the year.Assume there is a § 1231 lookback loss of $4,000.

Accepted Answer

The stamping machine ($21,736),tractor (

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

Vertigo,Inc.,has a 2012 net § 1231 loss of $64,000 and had a $32,000 net § 1231 gain in 2011.For 2012,Vertigo's net § 1231 loss is treated as:

Accepted Answer

A)  Ordinary loss. 
B)  Ordinary gain. 
C)  Capital loss. 
D)  Capital gain. 
E)  None of the above. 
A)  Ordinary loss. 
B)  Ordinary gain. 
C)  Capital loss. 
D)  Capital gain. 
E)  None of the above.

Question 10

Section 1231 property includes nonpersonal use property where casualty losses exceed casualty gains for the taxable year.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

Orange Company had machinery destroyed by a fire on December 23,2012.The machinery had been acquired on April 1,2010,for $49,000 and its adjusted basis was $14,200.The machinery was completely destroyed and Orange received $30,000 of insurance proceeds for the machine and did not replace it.This was Orange's only casualty or theft event for the year.As a result of this event,Orange has:

Accepted Answer

A)  $4,200 ordinary loss. 
B)  $15,800 § 1245 recapture gain. 
C)  $14,200 § 1245 recapture gain. 
D)  $30,000 § 1231 gain. 
E)  None of the above. 
A)  $4,200 ordinary loss. 
B)  $15,800 § 1245 recapture gain. 
C)  $14,200 § 1245 recapture gain. 
D)  $30,000 § 1231 gain. 
E)  None of the above.

Question 13

Verway,Inc.,has a 2012 net § 1231 gain of $55,000 and had a $62,000 net § 1231 loss in 2011.For 2012,Verway's net § 1231 gain is treated as:

Accepted Answer

A)  $55,000 ordinary loss. 
B)  $55,000 ordinary gain. 
C)  $55,000 capital loss. 
D)  $55,000 capital gain. 
E)  None of the above. 
A)  $55,000 ordinary loss. 
B)  $55,000 ordinary gain. 
C)  $55,000 capital loss. 
D)  $55,000 capital gain. 
E)  None of the above.

Question 14

Which of the following statements is correct?

Accepted Answer

A)  When depreciable property is gifted to another individual taxpayer, the depreciation recapture potential is extinguished. 
B)  When depreciable property is inherited by a taxpayer, the depreciation recapture potential is extinguished. 
C)  When corporate depreciable property is distributed as a dividend, the depreciation recapture potential is generally not recognized. 
D)  When depreciable property is contributed to charity, the depreciation recapture potential has no effect on the amount of the charitable contribution deduction. 
E)  All of the above are correct. 
A)  When depreciable property is gifted to another individual taxpayer, the depreciation recapture potential is extinguished. 
B)  When depreciable property is inherited by a taxpayer, the depreciation recapture potential is extinguished. 
C)  When corporate depreciable property is distributed as a dividend, the depreciation recapture potential is generally not recognized. 
D)  When depreciable property is contributed to charity, the depreciation recapture potential has no effect on the amount of the charitable contribution deduction. 
E)  All of the above are correct.

Question 15

Which of the following is correct?

Accepted Answer

A)  Improperly classifying a § 1231 loss as a capital loss might affect adjusted gross income. 
B)  Improperly classifying a capital loss as a § 1231 loss might affect adjusted gross income. 
C)  Misclassifying a § 1231 gain as a short-term capital gain might affect adjusted gross income. 
D)  Misclassifying a short-term capital gain as a § 1231 gain might affect adjusted gross income. 
E)  All of the above. 
A)  Improperly classifying a § 1231 loss as a capital loss might affect adjusted gross income. 
B)  Improperly classifying a capital loss as a § 1231 loss might affect adjusted gross income. 
C)  Misclassifying a § 1231 gain as a short-term capital gain might affect adjusted gross income. 
D)  Misclassifying a short-term capital gain as a § 1231 gain might affect adjusted gross income. 
E)  All of the above.

Question 16

Vertical,Inc.,has a 2012 net § 1231 gain of $67,000 and had a $22,000 net § 1231 loss in 2011.For 2012,Vertical's net § 1231 gain is treated as:

Accepted Answer

A)  $45,000 long-term capital gain and $22,000 ordinary loss. 
B)  $67,000 ordinary gain. 
C)  $45,000 long-term capital gain and $22,000 ordinary gain. 
D)  $67,000 capital gain. 
E)  None of the above. 
A)  $45,000 long-term capital gain and $22,000 ordinary loss. 
B)  $67,000 ordinary gain. 
C)  $45,000 long-term capital gain and $22,000 ordinary gain. 
D)  $67,000 capital gain. 
E)  None of the above.

Question 17

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

Accepted Answer

A)  An exchange of depreciable business equipment for like-kind business equipment with gain realized, but not recognized. 
B)  A nontaxable incorporation under § 351. 
C)  A nontaxable contribution to a partnership under § 721. 
D)  A nontaxable reorganization. 
E)  None of the above. 
A)  An exchange of depreciable business equipment for like-kind business equipment with gain realized, but not recognized. 
B)  A nontaxable incorporation under § 351. 
C)  A nontaxable contribution to a partnership under § 721. 
D)  A nontaxable reorganization. 
E)  None of the above.

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Part II of Form 4797 is used to report gains from the sale of depreciable business equipment sold at a gain and held more than one year.

Accepted Answer

A) True 
 B)False

Question 20

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?

Accepted Answer

The § 1245 and § 1250 recapture gains ar

Section 1231 applies to the sale or exchange of business properties,but not to personal use activity casualties.

Copper Corporation sold machinery for $27,000 on December 31,2012.The machinery had been purchased on January 2,2009,for $30,000 and had an adjusted basis of $21,000 at the date of the sale.For 2012,what should Copper Corporation report?

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

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

Blue Company sold machinery for $45,000 on December 23,2012.The machinery had been acquired on April 1,2010,for $49,000 and its adjusted basis was $14,200.The § 1231 gain,§ 1245 recapture gain,and § 1231 loss from this transaction are:

Which of the following real property could be subject to § 1250 depreciation recapture?

The chart below describes the § 1231 assets sold by the Ecru Company (a sole proprietorship)this year.Compute the gain or loss from each asset disposition and determine the net § 1231 gain treated as long-term capital gain for the year.Assume there is a § 1231 lookback loss of $4,000.

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

Vertigo,Inc.,has a 2012 net § 1231 loss of $64,000 and had a $32,000 net § 1231 gain in 2011.For 2012,Vertigo's net § 1231 loss is treated as:

Section 1231 property includes nonpersonal use property where casualty losses exceed casualty gains for the taxable year.

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

Verway,Inc.,has a 2012 net § 1231 gain of $55,000 and had a $62,000 net § 1231 loss in 2011.For 2012,Verway's net § 1231 gain is treated as:

Which of the following statements is correct?

Which of the following is correct?

Vertical,Inc.,has a 2012 net § 1231 gain of $67,000 and had a $22,000 net § 1231 loss in 2011.For 2012,Vertical's net § 1231 gain is treated as:

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

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

Part II of Form 4797 is used to report gains from the sale of depreciable business equipment sold at a gain and held more than one year.

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?

An Introduction to Taxation and Understanding the Federal Tax Law

Working With the Tax Law

Tax Formula and Tax Determination; an Overview of Property Transactions

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, cost Recovery, amortization, and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Alternative Minimum Tax

Tax Credits and Payment Procedures

Property Transactions: Determination of Gain or Loss and Basis Considerations

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Exam 17: Property Transactions: Section 1231 and Recapture Provisions

Section 1231 applies to the sale or exchange of business properties,but not to personal use activity casualties.

Copper Corporation sold machinery for $27,000 on December 31,2012.The machinery had been purchased on January 2,2009,for $30,000 and had an adjusted basis of $21,000 at the date of the sale.For 2012,what should Copper Corporation report?

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

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

Blue Company sold machinery for $45,000 on December 23,2012.The machinery had been acquired on April 1,2010,for $49,000 and its adjusted basis was $14,200.The § 1231 gain,§ 1245 recapture gain,and § 1231 loss from this transaction are:

Which of the following real property could be subject to § 1250 depreciation recapture?

The chart below describes the § 1231 assets sold by the Ecru Company (a sole proprietorship)this year.Compute the gain or loss from each asset disposition and determine the net § 1231 gain treated as long-term capital gain for the year.Assume there is a § 1231 lookback loss of $4,000.

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

Vertigo,Inc.,has a 2012 net § 1231 loss of $64,000 and had a $32,000 net § 1231 gain in 2011.For 2012,Vertigo's net § 1231 loss is treated as:

Section 1231 property includes nonpersonal use property where casualty losses exceed casualty gains for the taxable year.

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

Verway,Inc.,has a 2012 net § 1231 gain of $55,000 and had a $62,000 net § 1231 loss in 2011.For 2012,Verway's net § 1231 gain is treated as:

Which of the following statements is correct?

Which of the following is correct?

Vertical,Inc.,has a 2012 net § 1231 gain of $67,000 and had a $22,000 net § 1231 loss in 2011.For 2012,Vertical's net § 1231 gain is treated as:

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

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

Part II of Form 4797 is used to report gains from the sale of depreciable business equipment sold at a gain and held more than one year.

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?

An Introduction to Taxation and Understanding the Federal Tax Law

Working With the Tax Law

Tax Formula and Tax Determination; an Overview of Property Transactions

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, cost Recovery, amortization, and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Alternative Minimum Tax

Tax Credits and Payment Procedures

Property Transactions: Determination of Gain or Loss and Basis Considerations

Property Transactions: Nontaxable Exchanges

Property Transactions: Capital Gains and Losses

Accounting Periods and Methods

Deferred Compensation

Corporations and Partnerships

Filters