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

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. ​

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

Harold is a head of household,has $27,000 of taxable income in 2017 from non-capital gain or loss sources,and has the following capital gains and losses: ​ Ignore standard deductions and exemptions.What is Harold's taxable income and the tax on that taxable income?

In 2017,an individual taxpayer has $863,000 of taxable income that includes $48,000 of 0%/15%/20% long-term capital gain.Which of the following statements is correct?

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

On January 10,2017,Wally sold an option for $2,000 on vacant land he held as an investment.He had purchased the land in 2013 for $76,000.The option allowed the option holder to purchase the property for $122,000 plus the cost of the option.On March 1,2017,the option holder exercised the option.What is the amount and nature of Wally's gain or loss from disposition of the land?

Property sold to a related party that is depreciable by the purchaser may cause the seller to have ordinary gain.

Carol had the following transactions during 2017: a painting held for two years and sold at a gain of $85,000; 100 shares of Gray stock held six months and sold for a loss of $6,000; 50 shares of Yellow stock held 18 months and sold for a gain of $36,000.Carol also had $264,000 of taxable income from other sources than these property transactions.What is Carol's net capital gain or loss and what is her taxable income?

Why is it generally better to have a net § 1231 gain year followed by a net § 1231 loss year rather than a net § 1231 loss year followed by a net § 1231 gain year?

Larry was the holder of a patent on a video game.During 2017,he sold all substantial rights in the patent for $365,000 in cash and a 3% royalty on the purchaser's first $10,200,000 of sales each year related to the product in which the patent is incorporated.Larry had not reduced the patent to practice.He had a $86,000 basis for the patent.During 2017,he received $30,000 in royalties.What is the nature and amount of Larry's gain?

A security that was purchased by an individual and qualifies as § 1244 stock becomes worthless.The taxpayer is single and the loss is $30,000.The loss is treated as an ordinary loss.

A retail building used in the business of a sole proprietor is sold on March 10,2017,for $342,000.The building was acquired in 2007 for $400,000 and straight-line depreciation of $104,000 had been taken on the building.What is the maximum unrecaptured § 1250 gain from the disposition of this building?

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.)

White Company acquires a new machine for $75,000 and uses it in White's manufacturing operations.A few months after White places the machine in service,it discovers that the machine is not suitable for White's business.White had fully expensed the machine in the year of acquisition using § 179.White sells the machine for $60,000 in the tax year after it was acquired,but held the machine only for a total of 10 months.What was the tax status of the machine when it was disposed of and the amount of the gain or loss?

To compute the holding period,start counting on the day after the property was acquired and include the day of disposition.

The possible holding periods for capital assets include:

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

"Collectibles" held long-term and sold at a gain are subject to maximum tax rate of 28%.An individual taxpayer recently sold an antique car for $40,000.The car had been held for several years and $30,000 was originally paid for it.Explain why the car is or is not a collectible.

Michael is in the business of creating posters (display art) for the movie industry.He creates a poster and sells it for a lump sum.He has:

Describe the circumstances in which the potential § 1245 depreciation recapture is extinguished.