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

For tax purposes,there is no original issue discount on a bond unless the bond is issued for less than its face value and the difference between the face value and the bond issue price is at least one-fourth of 1 percent of the redemption price at maturity multiplied by the number of years to maturity.

An individual taxpayer received a valuable painting from his uncle,a famous painter.The painter created the painting.After the taxpayer held the painting for two years,he sold it for a $400,000 gain.The gain is a long-term capital gain.

Since the Code section that defines "capital asset" says what is not a capital asset,other Code sections have to help determine what is and what is not a capital gain or loss.

For § 1245 recapture to apply,accelerated depreciation must have been taken on the property.

The tax law requires that capital gains and losses be separated from other types of gains and losses.Among the reasons for this treatment are:

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?

Phil's father died on January 10,2017.The father had owned stock for 20 years with a basis of $45,000 that was transferred to Phil as a gift on August 10,2016,when the stock was worth $430,000.His father paid no gift taxes.This stock was worth $566,000 at the date of the father's death.Phil sold the stock for $545,000 net of commissions on February 23,2017.What is the amount and nature of Phil's gain or loss from disposition of this property?

The tax law requires that capital gains and losses be separated from other types of gains and losses because there are limitations on the deduction of net capital losses.

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?

Which of the following events could result in § 1250 depreciation recapture?

If a capital asset is sold at a gain,the holding period is important.

Williams owned an office building (but not the land) that was destroyed by a fire.The building was insured and Williams has a $156,000 gain because his insurance recovery exceeded his adjusted basis for the building.Williams may replace the building.Williams had taken $145,000 of depreciation on the building,has no § 1231 lookback loss,has no other § 1231 transactions for the year,and has no Schedule D transactions for the year.What is the final nature of Jamison's gain for the year and what tax rate(s) apply to the gain if:

The maximum amount of the unrecaptured § 1250 gain (25% gain) is the depreciation taken on real property sold at a recognized gain.

Section 1245 depreciation recapture potential does not carryover from a deceased taxpayer to the beneficiary taxpayer.

Stanley operates a restaurant as a sole proprietorship.Which of the following items are capital assets in the hands of Stanley?

A lease cancellation payment received by a lessee is generally treated as an exchange because the lease extinguished is usually a capital asset.

Section 1231 property generally does not include artistic compositions.

Which of the following assets held by a cash basis accounting firm is a § 1231 asset?

Which of the following statements is correct?

The chart below describes the § 1231 assets sold by the Tan 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 $14,000.