Exam 14: Property Transactions, capital Gains and Losses, sec1231, and Recapture Provisions

Individuals who are not professional real estate developers may get capital gain treatment for sale of their real property if they engage only in limited development activities.

An individual taxpayer with 2017 net short-term capital loss of $5,000 generally can deduct up to $3,000 for AGI and carry the balance forward to 2018.

Seamus had $16,000 of net short-term capital loss in 2016.In 2017,Seamus has $17,000 of long-term capital loss and $26,000 of long-term capital gain.Which of the following statements is correct?

Short-term capital gain is eligible for a special tax rate only when it exceeds long-term capital gain.

Gold Company signs a 13-year franchise agreement with Silver.Silver retained significant powers,rights,and a continuing interest.Gold Company (the franchisee) makes noncontingent payments of $18,000 per year for the first four years of the franchise.Gold Company also pays a contingent fee of 2% of gross sales every month.Which of the following statements is correct?

Blue Company sold machinery for $45,000 on December 23,2017.The machinery had been acquired on April 1,2015,for $69,000 and its adjusted basis was $34,200.The § 1231 gain,§ 1245 recapture gain,and § 1231 loss from this transaction are:

Sharon has the following results of netting her short-term and long-term capital gains and losses for 2017: $56,000 short-term capital loss,and $82,000 net long-term capital gain ($21,000 0%/15%/20% long-term capital gain,and $61,000 25% long-term capital gain).

Casualty gains and losses from nonpersonal use assets are not netted against casualty gains and losses from personal use assets.

Charmine,a single taxpayer with no dependents,has already incurred a $10,000 § 1231 gain in 2017 and has no § 1231 lookback losses.The taxpayer purchased a business machine for $100,000 five years ago,$70,000 of depreciation has been taken on it,and the machine is now worth $90,000.How will the net § 1231 gain or loss be affected if the taxpayer trades in the business machine for a like-kind business machine and pays an additional $12,000 in cash to obtain the replacement machine? If Charmine already has $352,000 of taxable income which does not include a $10,000 § 1231 gain or any capital gains or losses,what is her taxable income?

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

In 2017,Mark has $18,000 short-term capital loss,$7,000 28% gain,and $6,000 0%/15%/20% gain.Which of the statements below is correct?

In 2013,Aaron purchased a classic car that he planned to restore for $12,000.However,Aaron is too busy to work on the car and he gives it to his daughter Ellie in 2017.At this time,the fair market value of the car has declined to $10,000.Aaron paid no gift tax on the transaction.Ellie completes some of the restoration herself with out-of-pocket costs of $5,000.She later sells the car for $30,000.What is Ellie's recognized gain or loss on the sale of the car?

In 2017 Angela,a single taxpayer with no dependents,disposed of for $44,000 a business building which cost $100,000.$60,000 of depreciation had been taken on the building.Angela has a short-term capital loss of $3,000 this year.She has taxable income (not related to property transactions) of $125,000.She has no § 1231 lookback loss.What is the amount and nature of the gain or loss,what is Angela's taxable income,and what is her tax on the taxable income?

In 2016,Jenny had a $12,000 net short-term capital loss and deducted $3,000 as a capital loss deduction.In 2017,Jenny has a $18,000 0%/15%/20% long-term capital gain and no other capital gain or loss transactions.Which of the statements below is correct for 2017?

Mike is a self-employed TV technician.He is usually paid as soon as he completes repairs,but occasionally bills a customer with payment expected within 30 days.At the end of the year he has $2,500 of receivables outstanding.He expects to collect $1,200 of this and write off the remainder.Mike is a cash basis taxpayer and had net earnings from his business (not including the effect of the items above) of $55,000.He also had $3,500 interest income,$200 gambling winnings,and sold corporate stock for $7,000.The stock had been purchased in 2013 for $8,200.Mike is single,has no dependents,and claims the standard deduction.What is his 2017 taxable income? (Ignore the self-employment tax deduction.)

If the holder of an option fails to exercise the option,the lapse of the option is considered a sale or exchange on the option expiration date.

Spencer has an investment in two parcels of vacant land.Parcel 1 is a capital asset and parcel 2 is a § 1231 asset.Spencer already has short-term capital loss for the year he would like to offset with capital gain.Spencer has § 1231 lookback loss that exceeds the gain from the disposition of either land parcel.Spencer only wants to sell one land parcel and each of them would yield the same amount of gain.The gain that would be recognized exceeds the short-term capital loss Spencer already has.Which of the statements below is correct?

A lessor is paid $45,000 by its commercial tenant as a lease cancellation fee.The tenant wanted to get out of its lease so it could move to a different building.The lessor had held the lease for three years before it was canceled.The lessor had a zero tax basis for the lease.The lessor has received:

When a patent is transferred,the most common forms of payment received by the transferor are a lump sum and/or periodic payment.

A business taxpayer sells depreciable business property with an adjusted basis of $40,000 for $32,000.The taxpayer held the property for more than a year.The taxpayer has an $8,000 capital loss.